Wednesday, May 22, 2024
Lawyers Run The WorldPayment Processor and Executive to Pay Millions to Settle...

Payment Processor and Executive to Pay Millions to Settle FTC Allegations of Assisting in Fraudulent Schemes and Credit Card Laundering


- Advertisment -spot_img

According to the Federal Trade Commission, one of the world’s leading payment processing companies and its former executive will pay more than $40.2 million to settle FTC charges that they knowingly processed payments and laundered, or assisted laundering of, credit card transactions for scams that targeted hundreds of thousands of consumers.

As alleged in the complaint, First Data Merchant Services, LLC purportedly disregarded  warnings from employees, banks and others that Chi “Vincent” Ko, through his company that served as an independent sales agent for First Data, was laundering, and First Data was assisting and facilitating laundering, payments for companies that were breaking the law over a number of years.

According to the FTC, among the warnings was a 2014 e-mail from Wells Fargo’s executive vice president, saying “Why is First Data signing ISOs like [First Pay]?  They are going to get First Data and Wells Fargo in trouble with the FTC and CFPB due to consumer deceptive practices…”  In addition, a 2014 Visa investigation required First Data to pay back $18.7 million in charges processed by Ko and temporarily banned First Data from bringing on high-risk merchants.  A 2015 forensic audit conducted as part of Visa’s investigation indicated that First Data had “no controls” on how the company managed high-risk merchants.

The FTC alleges that Ko was later hired as an executive at First Data.

According to the FTC, Ko, through his prior company, First Pay Solutions LLC, opened hundreds of merchant accounts for at least four scams – three that were the subject of FTC actions, and one that was the subject of a U.S. Department of Justice criminal prosecution.

The FTC alleges that, from 2012 to 2014, Ko opened accounts under false names, provided Wells Fargo Bank with deceptive information to open the accounts, and ignored evidence that his clients were engaged in fraud.

The complaint alleges that the defendants violated the FTC Act and the Telemarketing Sales Rule.

“First Data is paying $40 million because it repeatedly looked the other way while its payment processing services were being used to commit fraud,” said Daniel Kaufman, FTC attorney and Deputy Director of the FTC’s Bureau of Consumer Protection.  “When companies fail to screen out fraudsters exploiting the payment processing system to steal people’s money, they’re breaking the law – and injuring consumers.”

In addition to paying more than $40 million, under the terms of its proposed settlement, First Data, which was acquired by Fiserv, Inc. in 2019, will be prohibited from assisting or facilitating FTC Act violations related to payment processing and evading fraud and risk oversight programs.  In addition, the company will be required to screen and monitor certain high-risk merchant-clients, as well as establish and implement an oversight program to monitor its wholesale ISOs.

The settlement also requires First Data to hire an independent assessor to oversee the company’s compliance with the settlement’s oversight program for the next three years.

Under the terms of his proposed settlement, Ko will be required to pay $270,373.70.  He will be banned from payment processing for certain types of high-risk merchants, credit card laundering activities, making or assisting others in making false or misleading statements, and assisting or facilitating violations of the FTC Act.

Richard B. Newman is an FTC defense lawyer at Hinch Newman LLP.  Follow him on Twitter @FTC defense lawyer.

Informational purposes only. Not legal advice. May be considered attorney advertising.

Richard B. Newman
Richard B. Newman
Richard B. Newman is an Internet Lawyer at Hinch Newman LLP focusing on advertising law, Internet marketing compliance, regulatory defense and digital media matters. His practice involves conducting legal compliance reviews of advertising campaigns across all media channels, regularly representing clients in high-profile investigative proceedings and enforcement actions brought by the Federal Trade Commission and state attorneys general throughout the country, advertising and marketing litigation, advising on email and telemarketing best practice protocol implementation, counseling on eCommerce guidelines and promotional marketing programs, and negotiating and drafting legal agreements.

What's your opinion?

Latest news

Selling Adtech in 2024: Shiv Gupta’s Guide to Winning Friends and Influencing Algorithms

Selling adtech in 2024? Strap in, because this isn’t your grandpa’s sales playbook. Gavin Dunaway, the marketing maestro at...

Dynamic Video Overlays: Finally, Ads That Don’t Make You Want to Scream

As always let’s cut the fluff and get right to the really yummy juicy bits. Meet Aperture, Origin's latest...

How The Trade Desk Became the Ghost in the Marketing Machine

Enter Olivia Kory, the Head of Strategy at Haus: “The Trade Desk has to be the most successful company...

Welcome to the Brave New World of Call Centers – Now with 99% Less Human Interaction!

Guess What? Frank Casale, the grandmaster of outsourcing, has just unveiled his latest white paper, "The Call Center of...

Retail Media Networks: Still Not Ready for Prime Time (But Huge Potential Looms)

Retail Media Networks (RMNs) have been hyped as the advertising messiah, promising brands a golden ticket of rich consumer...

Sucker Punching Clickbait: David Kohl’s Fight for Ad Integrity

Alright, folks, brace yourselves. We've got a hot one today on "The Adotat Show." David Kohl, the ad tech...

Must read

Dynamic Video Overlays: Finally, Ads That Don’t Make You Want to Scream

As always let’s cut the fluff and get right...

How The Trade Desk Became the Ghost in the Marketing Machine

Enter Olivia Kory, the Head of Strategy at Haus:...

You might also likeRELATED
Recommended to you