Financial news reports about payment companies flouting government regulations have been on the rise recently. And it’s sending many industries into spirals.
Whether it’s senators calling on the labor department to investigate companies misclassifying workers (and advising their clients to do the same), or more recently, companies serving as the payments backbone of the shady prop trading industry by downplaying the essential KYC (Know Your Customer) process, some operators are making news for all the wrong reasons. The repercussions could reach those around them.
This outburst is a stark warning of the risks involved when choosing a payment provider for your business.
The cost of prioritizing ARR over compliance
Banking partnerships are hard to get and easy to lose. Building those relationships could take years of thorough checks and due diligence. And they can unravel in no time if the banks believe a partner operates beyond its risk threshold.
It’s also why the most credible and dependable payment companies use bank rails to deliver payments. Banks are fundamentally risk-averse and maintain strict procedures to prevent fraud, avoid money laundering, and block payments to people or groups suspected of criminal activity.
These procedures, including KYC, AML (Anti-Money Laundering), money-transfer licenses, and audits, as well as regulatory bodies like the Commodity Futures Trading Commission (CFTC) and license regulators, provide a vital safety net for society. They make it hard for criminals and other bad actors to move money.
But companies and vendors that pursue a strategy of growth at all costs may take shortcuts. They might turn a blind eye to activities their KYC procedures should reveal.
The severe consequences of weak AML or KYC
While the recent headlines point to the need for far greater care in choosing a payment provider, there are many more examples of companies taking shortcuts and paying the price – for themselves and for their clients.
- The digital bank, N26, was banned from operating in Italy after regulators determined that its anti-money laundering procedures were found to be below standard. It wasn’t the first time the German-based company was disciplined for weak AML. In 2021, N26 was fined more than $4.5 million by German regulators.
- Swedish payment company Trustly was headed for one of the largest IPOs in the fintech field in 2021 until Sweden’s Financial Supervisory Authority raised questions about the company’s due diligence on its end customers. The $11 billion public offering was ultimately delayed indefinitely.
- Bank of Lithuania revoked its license from electronic money institution UAB PayrNet (the regulated entity for Railstr in Europe) for a series of compliance violations, including serious breaches of laws regarding the prevention of money laundering and terrorist financing. The company had been valued at $1 billion, but without a license for financial transactions, it was forced to return all customer funds and seek bankruptcy protection.
Papaya: following strict compliance and KYC
From Papaya’s earliest days, compliance has been our top priority. For you, it means peace of mind. You can rest assured that your payroll and payments meet the strictest requirements in every local jurisdiction.
1. Licensed and regulated
Papaya, through our subsidiary, holds five money transfer licenses around the globe. That means we meet all government regulations in making payments across the globe – and file detailed reports to five different regulatory bodies on a regular basis. There are regulations on how to operate as a payroll payments provider – how we protect your money and how transparent we are expected to be – that give you control of your operations.
2. Banking partnerships
We partner with the biggest banks in the world – such as J.P. Morgan Chase – to ensure we have global reach in payment delivery. We hold funds securely in a segregated client money account. We run fraud analyses before each payment delivery to mitigate risks.
3. Strict KYC and AML process
When it comes to ensuring the legitimacy of our payment recipients, there is no room for shortcuts. We perform KYC and AML screenings for each new client and all their workers who are being paid through Papaya Payments. The KYC happens when we onboard a new client and continues after we perform successful penny tests to all workers. We also run rigorous screenings for every payment, every cycle. Our dedicated team and existing infrastructure also allow us, in most cases, to complete the KYC process within hours of receiving all required documents.
4. Bank-level security
We deliver bank-level security to protect your sensitive payroll and payments data. Our platform adheres to strict international standards and certifications, such as ISO 27001 and 27701, SOC1 Type II, and SOC2 Type II. The Papaya platform alerts us if there is unusual activity around a payment that requires additional authorization. And the same type of safeguard also protects our clients from internal fraud.
Don’t risk compliance – or your next payday
Companies that come under government scrutiny may face sanctions. It means anyone who trusted them with their funds is pulled into unfortunate situations.
If your payment provider fails to meet regulations, your company might pay the price – by missing payments to employees and authorities. Neither will accept the excuse that your payments provider is at fault.
Don’t risk non-compliance. Choose Papaya Global. Contact us today to schedule a demo and see how we ensure compliance around the globe.
