FTC Settles Complaint Against Payment Processor for Alleged Payment Processing on Behalf of Clients Engaged in Fraudulent Conduct

The FTC filed a Complaint and Stipulated Final Order (Order) in California District Court against a Defendant payment processing company and its individual officers, to settle all matters stemming from allegations that the Defendants violated provisions of the FTC Act (Act).  Specifically, Defendants allegedly processed debit and credit card payments on behalf of clients it knew or should have known were engaged in fraudulent activities subject to federal civil and criminal enforcement activities.  The Order includes a monetary judgment against Defendants in the amount of $110 million in favor of the FTC.

The Defendants neither admitted nor denied the allegations in the Complaint concerning alleged violations of the Act’s prohibitions against unfair or deceptive acts or practices in or affecting commerce.  The Defendants’ activities that are the subject of the Complaint and Order include allegations of submitting false information on behalf of at least one client to circumvent card network rules and transaction monitoring procedures designed to prevent fraud.

The Order permanently restrains Defendants from, inter alia, payment processing and from assisting others engaged in payment processing, credit card laundering, and making false statements related to merchant accounts.

According to the underlying Complaint, a 2009 Nevada federal court ruling against that same client of the Defendants for fraudulent debiting of consumer accounts, did not deter Defendants from continuing to do business with that entity.  Defendants, acting as non-bank acquirers or payment facilitators on behalf of merchant-clients, allegedly processed transactions for shell companies, some of which were deliberately attempting to circumvent scrutiny of fraudulent transactions by, among other methods, creating shell companies and submitting merchant account applications with false information, providing dummy websites to mask their businesses, and laundering transactions through accounts registered to other merchants.

The FTC’s Complaint and Order are viewable here, and here, respectively.