How To Protect Our Financial Well-Being

 Nearly every business nowadays accepts several types of payments — cash, card, money order, or digital funds.

In order to accept anything but cash, the business must go through merchant onboarding.

The merchant onboarding process was designed as part of the anti-money laundering (AML) and counter-terrorism funding (CTF) standards.

Why is merchant on-boarding important?

Merchant on-boarding is the process of checking for the possibility of financial crimes from a business.

In 2018, there were at least $97.04 trillion dollars worth of credit card charges in America alone. This leaves lots of room for scammers, money launderers, and many other types of financial criminals to attack.

For this reason, it is vital and legally required for any payment processing or service providers (PSPs) to collect information on a business. This is done to determine their actual intent and legitimacy to provide a risk assessment.

Without this process, crimes can be hidden under the disguise of a legitimate business, and our economy could take a hit, as well as the health of our financial structures.

What is the process?

The screening process is the first thing that takes place when an application for a PSP's services is turned in.

In the on-boarding process, you can expect the PSP to run a full check on all the information in your application, as well as you and your business itself.

Information that may be collected from a merchant includes:

  • Government identification of the owner and all people involved
  • Address of the business
  • Bank account information
  • How the business is setup
  • And many more details

A history check is then run on the merchant. In this step, the PSP checks for the things your business has done in the past, including the track record of the owner. This could mean the owner and business’ credit is checked.

As another part of the on-boarding, the PSP will look at previous transactions from and to the business to look for anything suspicious. This is usually done by looking at the business’ financial documents, like tax returns or invoices.

How does it help?

The merchant on-boarding process is vital in determining the risk that a business poses in terms of being fraudulent or dealing with criminal activity.

The process ensures that the business, its services, and its customers are legitimate.

Merchant on-boarding also teaches the merchant how to detect fraudsters before they attempt to commit crimes.

On-boarding fraud is one way criminals try to gain a foothold. The merchant on-boarding process can be used to detect this fraud.

Due to the increase in financial crimes and the ability for the criminal to infiltrate every part of a business to use for their plans, there are standards and regulations in place.

The AML and CTF standards are among the most used, involving due diligence and Know your business and customer.

Among these standards is also the merchant on-boarding process.

This requires any business that wants to accept more than cash to go through merchant on-boarding.

It is through these vital procedures being followed globally that we can end financial crimes.

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