Running The Global Payments Compliance Playbook

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Payments is already a highly regulated and complex space, but when it comes to moving money for Global Citizens, the rules that govern these kinds of payments are well beyond just the basics.

Part of the challenge in making sure that there’s a master playbook for global payments is that every country — and, potentially, every particular payment method within that country — each has its own set of requirements that need to be adhered to.

In the latest installment of Flywire’s podcast series on Global Citizens and the top characteristics of x-border payment processors, we take a look at the compliance, rules and regulation side of getting high-ticket international payments from Point A to Point B.

Peter Butterfield, Chief Compliance Officer at Flywire, explained that one of the most critical aspects is having the appropriate payment rails in place.

“By that I mean making sure that you have a network of global banking partners with whom you’ve developed an appropriate relationship, whereby, from a collection and payment standpoint, there is more seamless activity and that your payment operations group is working very closely under tight information security guidelines to make sure that money gets there.”

For global payment processors like Flywire, there must be a clear understanding of the receiving institution’s baseline profile to ensure that there are no regulatory issues in that country where the recipient is located. If there are licenses required, Butterfield suggested investing in practical legal advice and potentially working with locally situated regulators.

Building up a relationship beforehand and possibly even having a presence on the ground to have those discussions in a particular country could make all the difference once the payments start going through the network.

“The last thing you want is it to be approaching a regulator when you desperately need the help. You want to make sure you have those relationships built upfront,” he noted.

The AML Conundrum

In many countries around the world, the movement of money across borders has become increasingly difficult in recent years due to the growing threat of terrorism elements that may be associated with those payments.

Governments and world leaders are cracking down on anti-money laundering, making it tough when Global Citizens are looking to send low-frequency, high-volume payments overseas.

But Butterfield said there are a number of ways payment processors can stay on the right side of AML.

It starts with not only having a robust AML policy in place but also having those policies audited and reviewed by banking partners within that processor’s network. There’s a number of elements of discipline that are required to promote a more holistic regulatory perspective.

While there’s been a crackdown on illicit money moved across border, Butterfield explained that, at the same time, there’s also been some enabling of global payments. He added that regulators are now working to integrate laws and to bring them a little more current because they are recognizing that money moves with the click of a button and not at a countertop surrounded by an exchange bureau.

Finding Comfort In Closing The Loop

Flywire’s payment processing services are geared towards both Global Citizens and the institutions they send money to for educational and health purposes.

Butterfield explained that the company’s collection network runs on a closed-loop system, which is more invoice-based, where money is delivered in exchange for a specific service. For Flywire, its customers are the recipients of payments in exchange for a service — education, health care and potentially other industry verticals.

“There’s a bit of definiteness around who that recipient is and what the funds will be used for, whether it’s to cover the costs of tuition or a particular path of health care or medical treatment that a sender might need,” he added.

Not only does it tend to be lower risk, but it also adds a layer of comfort to the payments.

As Butterfield pointed out, people are not going to ideally launder money by paying someone else’s school tuition or paying for someone’s health care services that they never receive.

“It’s a lot more tangible than an open-ended transfer from Person A to Person B,” he said.

However, no matter who is sending and receiving a global payment, there are still many things to keep in mind in terms of security.

The security of highly sensitive information, as well as the security of the money movement itself, is critical for payment processors to adhere to.

This requires making sure there are segregated and separate accounts allocated only for the recipients of the funds, meeting all industry-wide compliance standards and certifications for the systems that move the money, and what wraps around that is training for all employees on AML requirements, anti-corruption requirements and general information security practices.

For Flywire, doing a careful and thorough regulatory analysis is the first step before deciding to launch a service or establish a potential operating presence in a particular country. This involves whether or not it needs to have a local entity established and if it would help the company and its customers if they set up a local bank account.

“It’s really to understand what the regulatory environment is like, engaging with the regulators as needed and then having an appropriate explanation for the customers who will question us on it,” Butterfield said.