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Education

The Financial Crimes Enforcement Network (FinCEN)
has a mandate to collect suspicious activity reports from
financial institutions, money transmitters and other
fintech businesses, and make those reports available to law
Legal ease: enforcement – all for the protection of national security.

State laws and banking departments also provide for state
licensing of money transmitters and other kinds of fintech
businesses to be sure they are not owned by criminals or
terrorists, as well as ensure that they have policies and
Law, payments and procedures in place to prevent their abuse by criminals
or terrorists. Dozens of federal and state laws regulate
payments with the purpose of protecting national security.
national security The requirements of these laws are woven in throughout
our industry.
By Adam Atlas Negligence as security vulnerability
Attorney at Law Based on the handful of security incidents I have seen as
legal counsel to hundreds of payment services providers
or a typical payments professional, national secu- over many years, I've found that payments providers
rity can seem like a remote concern addressed involved in breaches of national security are not usually
by government security agencies tasked with intentionally complicit. Instead, they are complicit by
F protecting the nation. Typical payments com- their own negligence. If a payments provider has loose
panies do, however, have a substantial role in protecting underwriting criteria, weak system security or weak
national security. transaction monitoring, its "rails" become an easy target
for bad actors to abuse and use for illicit purposes.
There are laws that mandate the involvement of payments
companies in national security and, above mandatory legal There are legal reasons to have effective compliance
rules, payments companies may take various actions to policies, such as the rules of the BSA, FinCEN, OFAC
ensure that their businesses are not unwitting facilitators and payment network (such as Visa and Mastercard)
in doing harm. The purpose of this article is to address rules. There are also business reasons to have excellent
some of the legal issues at the intersection of payments security monitoring, for example, to prevent fraud, service
and national security. interruption and the financial costs of being associated

National security payments law with criminal activity. These legal and business motivators
for better security run throughout the payments industry
It's illegal to process payments for criminals. Knowingly and serve a dual purpose: they make payments businesses
processing a payment for a criminal purpose exposes better as businesses, and they make payments businesses
the processor for conspiracy to commit the underlying less likely to be vulnerable to abuse by criminals.
crime as well as an additional crime of money laundering.
That basic, common sense reach of criminal law is Where payments providers strive for best-in-class policies
augmented by the U.S. Department of the Treasury, Office and procedures and systems, they are likely to earn a
of Foreign Asset Control (OFAC), which publishes the collateral benefit of being less likely to be abused by bad
Specially Designated Nationals And Blocked Persons List actors who wish to exploit the U.S. payments industry for
comprising people (dubbed SDNs) for whom it is illegal to harmful purposes.
transact business.
Individual rights versus national security
Every time a merchant applies for a merchant account, the Payments providers, as with all businesses, should be
merchant is supposed to be run through OFAC screening mindful to not trample on individual rights when looking
to see that the merchant account owners are not SDNs. to improve the security of their systems. As a payments
provider, the decision to provide services to clients should
Financial institutions, such as banks and money not be based in illegal grounds of discrimination, such
transmitters, which include numerous new fintech as the proposed client's race or religion. The balancing of
businesses, are required by the Bank Secrecy Act (BSA) individual rights versus security plays out in all parts of
to also maintain anti-money laundering policies that help society – the payments industry is no exception.
prevent their businesses from being abused by criminals
and terrorists. OFAC screening is but one of a number The law does, however, allow for discrimination pertain-
of precautions that payments businesses take as part of ing to payments to certain geographic, such as North Ko-
protecting national security under the BSA. rea or Iran, as well as certain designated individuals, such
as SDNs. These rules are based on government-enacted
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