Since the US federal government launched Operation Choke Point to limit the spread of fraudulent merchants, more and more acquiring banks have been canceling the merchant accounts of high risk businesses around the globe. While this effort to demarket thousands of merchants included both fraudulent and legitimate businesses, many are still skeptical of the government’s operation.
What is Operation Choke Point?
In 2013, the federal government launched Operation Choke Point to seek out fraudulent merchants and payment processors who were supplying those merchants with credit card processing capabilities. The Department of Justice took charge of the operation, choosing to concentrate their efforts on payment processors and acquiring banks that work with high risk merchants. Their intent was to stop the fraud at the source, but many in the financial industry are starting to doubt the operation’s success.
Why are Merchant Accounts Being Canceled?
Acquirers are canceling more merchant accounts due to the close scrutiny of the federal government. Since the operation began, more than 10,000 merchants have lost their payment processing capabilities. This number is unusually high, and many experts believe it is because of Operation Choke Point. Many banks are reviewing their merchants’ credentials and looking for signs of fraud. If any activity is deemed suspicious, that merchant’s account could be canceled.
Is this Method Effective?
While fraudulent merchants are being recognized and eliminated by payment processors and acquiring banks, there are also some legitimate businesses that are suffering from demarketing. Fraudulent merchants are generally involved in high risk industries. This can include adult entertainment, online pharmaceuticals, and nutraceuticals. However, fraud can appear in any industry, and there are many honest, hard-working merchants who are considered high risk and aren’t being given a fair chance.
This is the main criticism of Operation Choke Point. The intent is good, but the way in which the operation is being conducted is resulting in many canceled merchant accounts for legitimate businesses. Many think that the Department of Justice should focus their efforts on identifying fraudulent merchants independently instead of singling out payment processors.
At Instabill, E-Commerce Businesses Given a Fair Chance
Instabill is a global merchant services provider based in the US. For more than a decade, we’ve been providing online and retail merchant accounts to businesses located here in the US and abroad. While we strongly discourage fraudulent and illegal business activities, we believe that dedicated and committed merchants in high risk industries deserve a fair chance. Our high risk merchant accounts come with fast approvals and reliable payouts to give you the payment processing solution you need. To learn more, simply contact us via the live chat function at the bottom of your screen. You can also call 1-800-318-2713 to speak with a live representative.