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Education

grams and monitoring their use for Where is the money?
AML issues. Program managers are
also required by the Bank Secrecy Act Issuers eat from the same plate as acquirers. Interchange, which for acquirers
to register with FinCEN. is a fixed infrastructure cost, is a revenue item in issuing programs. If you
want to earn some of the interchange, you can become a card issuing ISO.
Most states will not require a prepaid Depending on the issuing program, the card issuer can also add monthly, load
issuing program manager to obtain and other fees.
state money transmitter licenses pro-
vided that it doesn't handle funds A lot more cards are issued than meet the eye. Many are VANs that are useful
related to the card program. For ex- for no more than a day or so and used to fulfill a limited, specific payment
ample, if the program manager itself obligation. Acquiring ISOs should consider this burgeoning market as a
collects the money in its own bank ac- possible source of revenue to help merchants handle ourgoing payments.
count, an MSB license is more likely
required because the cardholder must On the acquiring side, ISOs should know their merchants are going to see an
rely on the program manager to deliv- increasing quantity of cards being presented as simple VANs, some of which
er the funds to the issuing bank. are actually emailed to the merchant (don't tell the PCI Council about that). ISOs
may see an opportunity in pricing merchants who receive VANs according to
On the acquiring side, there are also the risk associated with this newer form of card.
AML concerns pertaining to accep-
tance of large numbers of VANs, as Whether or not you are involved in the new rush into issuing, it's going to be a
the merchant has legitimate basis for part of the acquiring industry, ready or not.
questioning the provenance of the
funds being processed. In publishing The Green Sheet, neither the author nor the publisher is engaged in rendering legal,
accounting or other professional services. If legal advice or other expert assistance is required, the
Issuers are able to set controls on their services of a competent professional should be sought. For further information on this article,
VANs so they can be used for only a please contact Adam Atlas, attorney at law by email at atlas@adamatlas.com or phone at 514-
specific SIC code or even a specific 842-0886.
MID. These tools can substantially re-
duce fraud and money laundering in
the single-use VAN issuing market.

With a vast number of VANs flying
around the Internet, there is a substan-
tial security concern that one or more
parties will not keep them secure,
thereby leaving them vulnerable to a
hack and the ensuing losses.
What is the opportunity for ISOs?

ISOs might consider partnering with
one of the growing number of issuing
program managers (issuing ISOs) to
provide their merchant clients with
supplier payment services. ISOs are
well positioned to solicit merchants
for payment-related services. ISOs
usually offer only services related
to receiving payments. With issuing
products, ISOs may be able to help
merchants handle the additional
function of outgoing payments to
suppliers.

Payfacs and payment services
providers, which tend to have
additional technology offerings for
their sub-merchants, are well suited
for acceptance of VANs because their
transactions are rarely card-present.

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