This is one small example of how important it is for acquirers to properly identify its merchants during the onboarding process, then carefully monitor those merchants and the payments they accept. First Data was the acquirer for First Pay Solutions, which allegedly allowed independent agents to sign up fraudsters that submitted falsified applications and ultimately collected millions of dollars in illegal charges to consumers’ credit and debit accounts.
The fraud included a work-at-home business coaching offering and a debt relief telemarketing scheme that each took in at least $20 million, according to the FTC:
“First Data Merchant Services LLC and a former executive agreed to pay more than $40 million to settle a claim by the Federal Trade Commission that the company processed payments and laundered credit card transactions for scams targeting hundreds of thousands of consumers.
The agency alleged that ex-vice president Chi “Vincent” Ko, through his former company First Pay Solutions, opened hundreds of fake merchant accounts and shell companies to take payments from the unwary.
The FTC claimed that First Data, one of the biggest payment processing companies in the U.S., received multiple “warnings and direct evidence” that Ko’s company was “permeated by fraud” as far back as 2012 but continued to let Ko and First Pay open merchant accounts until 2014.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group