Understanding The AML Requirements For Payment Processors| Mema Consultant

Understanding The AML Requirements For Payment Processors

If you’re very familiar with the UK’s payment processing sector, you’ll surely agree that it uses many industry-specific terms. Some good examples are AML and third-party payment processors. According to the EU, all third-party payment processors are regulated by the Anti Money Laundering (AML) directives. Yes, there are AML requirements for payment processors to meet, to avoid getting exploited for different cases of money laundering and financial crimes.


In the rest of this post, you’ll get answers to the following payment processing-related questions:

  • What exactly are the third-party payment processors in the UK & how do they work?
  • Are there any benefits to using third-party payment processors?
  • What exactly are the global AML requirements for payment processors?


3rd-party Payment Processor: Understanding Exactly How These Processors Work

In the United Kingdom today, third-party payment processors are designed to help businesses receive payments online. These firms work with different companies by assisting them in facilitating transactions between their customers and the business. They do this by transferring funds into the business bank account from each customer’s credit or bank account.


Here’s Exactly How The Uk’s Third-party Payment Processors Work:

  • First, you need to understand that third-party processors erased the need for businesses to set up their merchant accounts to receive different payment methods online from their customers.


  • Instead, these payment processing firms serve as an intermediary between businesses and their customers. It’s a lot quicker for small and medium-sized businesses to work with these third-party processors. Using a merchant account, on the other hand, takes time and requires you to meet certain requirements.


  • The best third-party payment processors have a single merchant account, in which they aggregate all the transactions of their customers (businesses working with them). This way, all these businesses will indirectly be able to enjoy the functionality of merchant accounts through their preferred payment processor.

Apart from the speed and simplicity of businesses accessing the functionality of merchant accounts, working with a reliable third-party payment processor is worth it because:


  • The cost of working with these payment processors is well-structured when compared to that of the merchant account. Businesses only need to pay a flat fee for each transaction they execute. Merchant accounts, on the other hand, require different fees – set-up fees, varying transaction fees, and monthly fees.


  • Another benefit of working with third-party payment processors is that businesses can always use different payment options and currencies. This is very great for businesses looking to enter the global market.


  • That’s not all; third-party payment processors also take risk management very seriously. They understand how serious the topic of fraud is in the country. As such, they make use of the best fraud detection systems to secure all transactions.


AML Requirements For Payment Processors

For any third-party payment processor to run its business in the UK, it needs to align with the different Anti-Money Laundering (AML) requirements.

Money laundering has been a big issue in the United Kingdom, especially in the payment processing sectors. To reduce the global money laundering rate, AML directives were established. The AML requirements for payment processors are designed to help 3rd-party payment processing firms to avoid being exploited for money laundering cases. Businesses are also expected to factor in AML Compliance when trying to choose a reliable payment processor to work with.


That said, below are the latest AML requirements for payment processors in the UK and across the globe. According to the FCA, these requirements are grouped into five pillars, necessary for payment forms to create a strong and effective AML compliance program.

  1. First, all third-party payment processors must appoint a compliance officer.
  2. Internal policies are also required to help these firms remain AML compliant.
  3. To achieve an effective AML compliance program, these payment processing firms also need to train their employees the right way.
  4. Independent testing and auditing are also important to remain AML compliant.
  5. Strict risk assessment is also a must for these third-party payment processing firms to remain compliant with AML requirements.


The UK’s AML Requirements

In the United Kingdom today, many regulators come together to create AML requirements for payment processors to prevent money laundering and other financial crimes.


  • The UK’s Financial Conduct Authority (FCA) is one of the few regulators responsible for the AML requirements. This regulator focuses on helping the UK to control the behavior of different financial firms. One of the measures put in place by the FCA is the implementation of Customer Due Diligence (CDD), which helps to identify and prevent money laundering issues and other financial crimes.


  • Other regulators that work closely with the FCA to establish AML requirements for payment processors include:
  1. His Majesty’s Revenue and Customs (HMRC) is a tax authority that works closely with the FCA to investigate different money laundering cases. This tax authority also helps to create legislation to prevent different financial crimes.
  2. The National Crime Agency (NCA) is another authority that collaborates with the FCA and HMRC to combat the issue of money laundering in the UK. This agency provides well-trained staff that can identify money wandering signs and the culprits.


Why Should You Work With Mema Consultant Today?

That said, for third-party payment processors to run their businesses successfully, they need to remain FCA compliant with the different AML requirements, such as the fifth and sixth Anti-Money Laundering Directives (5AMLD & 6AMLD).


As a beginner payment processing firm, if you’re currently struggling to meet the different AML requirements for payment processors, Mema Consultant is one company you can trust. This compliant consultant company has a team of expert staff, who are more than ready to work you through the different UK’s AML requirements, including how to remain compliant with them.

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