If you’re an e-commerce or POS merchant applying for a merchant account, it’s not unusual these days to field a few extra questions about your processing history, bank statements or business plan. Over the last five years, acquiring banks are paying more attention to merchant account applicants – validating who they are and what they actually do.
Acquiring banks and payment service providers need to protect themselves from the thousands of fraud schemes – primarily money laundering – that seem to be rampant in the modern day. Hence, the requests (and need) for additional inquiries and further KYC documents.
A quick story: Why applying for a merchant account has changed
When we attended the ICE Totally Gaming conference and tradeshow in February, one of the exhibitioners was the London Metropolitan Police. One day, we looked on as a police official set dozens of driver’s licenses on a table at his stand, as if he was performing a card trick.
‘Can you identify the fraudulent ones?’ he asked the group. Those in front examined several of them. Each of the licenses looked (and felt) legitimate, though half of them were fraudulent.
The police officer’s display got us thinking about how applying for a merchant account is different from the last 10 years. Even the last five, all in the name of transparency and protection from money laundering.
What are UBO documents and why do they matter?
Ultimate beneficial owner (UBO) documents ascertain the identity of the primary owner of a business.
Particularly in the high risk merchant account space, we will sometimes come across merchants who are vague – even flat-out dishonest – about the identity of the UBO of a business. When any doubts are raised, we will press the merchant for the pertinent information we need, or cease from offering our merchant services.
More than ever, acquiring banks and PSPs need to protect themselves. Going into a partnership with a business without knowledge of who the primary owner can result in devastating circumstances.
So when our merchant account managers request further UBO documents, but are met with resistance, it’s a red flag. And we’re not likely to move forward.