BMO payments partner to pay $12M for serving shell companies

A major payment processor's failure to vet its clients has resulted in a $12 million settlement with the FTC. This case centers on a processor that worked with BMO Harris to facilitate transactions for shell companies, many of which were involved in deceptive consumer schemes. For retailers and operators, this serves as a critical warning about the 'know your customer' (KYC) requirements that govern the entire financing and payment ecosystem. The investigation revealed that despite internal red flags and high chargeback rates—often a sign of fraud or consumer dissatisfaction—the processor continued to open accounts for shady actors. By helping these entities mask their identities through shell companies, the processor allowed them to bypass the security filters set by banks. For legitimate merchants, this regulatory crackdown means that lenders and payment providers are likely to tighten their onboarding processes. You should expect more rigorous documentation requests and deeper background checks when applying for new financing programs or merchant accounts. The FTC is signaling that 'looking the other way' is no longer an option for financial intermediaries, which ultimately protects the integrity of the consumer credit market.

Source: American Banker — Top News

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