First Data Fined with $40 Million in Settlement for Fraud Charges

First Data, a popular payment processing platform, has agreed to enter into a Settlement Settlement Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 business days or T+2 after the trade is executed, and for listed options and government securities it is usually 1 day after the execution. Conversely in Europe, settlement date has also been adopted as 2 business days settlement cycles T+2.Settlement ExplainedA settlement is also the process of the payment of an outstanding account balance, an open invoice or charge. The electronic settlement system is a relatively new construct that has only become a standard in the past thirty years.For example, in real estate finance, you have settlement when the funds are accepted, and the deed to the property is traders to the new owner. Settlement can also mean an adjustment or agreement reached in matters of finance or business. For example, we have settled with the bank or the credit card company. A number of risks arise for the parties during the settlement process. These are effectively managed by the process of clearing, which follows trading and precedes settlement. By extension, clearing involves modifying those contractual obligations so as to facilitate settlement, often by netting and novation. Settlement in finance refers to the process when a buyer makes payment and receives the agreed-upon services or goods. The term is used on exchanges such as New York Stock Exchange (NYSE) when security changes hands. When the asset is transferred and placed in the new buyer's name, it is considered settled. This process could take a few hours or several days after a trade is made. It depends on the clearance process. In the United States, the settlement date for marketable stocks is usually 2 business days or T+2 after the trade is executed, and for listed options and government securities it is usually 1 day after the execution. Conversely in Europe, settlement date has also been adopted as 2 business days settlement cycles T+2.Settlement ExplainedA settlement is also the process of the payment of an outstanding account balance, an open invoice or charge. The electronic settlement system is a relatively new construct that has only become a standard in the past thirty years.For example, in real estate finance, you have settlement when the funds are accepted, and the deed to the property is traders to the new owner. Settlement can also mean an adjustment or agreement reached in matters of finance or business. For example, we have settled with the bank or the credit card company. A number of risks arise for the parties during the settlement process. These are effectively managed by the process of clearing, which follows trading and precedes settlement. By extension, clearing involves modifying those contractual obligations so as to facilitate settlement, often by netting and novation. Read this Term with the Federal Trade Commission (FTC) for its involvement in four scams and will pay over $40 million in fine.

Per Tuesday’s official announcement, First Data, which is a part of Fiserv, will pay $40 million and Chi “Vincent” Ko, a former executive of the firm, will pay another $270,374, all of which will be used to provide refunds to the consumers.

Along with the fine, the platform also agreed to improve the screening of its “high risk” merchant clients and hire a monitor for three years.

A major fraud, but neglected by many

Ko’s former company First Pay Solutions was involved in processing transactions of fraudulent merchants from 2012 to 2014.

The platform opened these accounts under false names, processed the Payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonly the basis of exchange involves fiat currency or legal tender, be it in the form of cash, credit or bank transfers, debit, or checks. While typically associated with cash transfers, payments can also be made in anything of perceived value, be it stock or bartering – though this is far more limited today than it has been in the past.The Largest Players in the Payments IndustryFor most individuals, the payments industry is dominated currently by card companies such as Visa or Mastercard, which facilitate the use of credit or debit expenditures. More recently, this industry has seen the rise of Peer-to-Peer (P2P) payments services, which have gained tremendous traction in Europe, the United States, and Asia, among other continents.One of the biggest parameters for payments is timing, which looms as a crucial element for execution. By this metric, consumer demand incentivizes technology that prioritizes the fastest payment execution.This can help explain the preference for debit and credit payments overtaking check or money orders, which in previous decades were much more commonly utilized. A multi-billion-dollar industry, the payments space has seen some of the most innovation and advances in recent years as companies look to push contactless technology with faster execution times. One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonly the basis of exchange involves fiat currency or legal tender, be it in the form of cash, credit or bank transfers, debit, or checks. While typically associated with cash transfers, payments can also be made in anything of perceived value, be it stock or bartering – though this is far more limited today than it has been in the past.The Largest Players in the Payments IndustryFor most individuals, the payments industry is dominated currently by card companies such as Visa or Mastercard, which facilitate the use of credit or debit expenditures. More recently, this industry has seen the rise of Peer-to-Peer (P2P) payments services, which have gained tremendous traction in Europe, the United States, and Asia, among other continents.One of the biggest parameters for payments is timing, which looms as a crucial element for execution. By this metric, consumer demand incentivizes technology that prioritizes the fastest payment execution.This can help explain the preference for debit and credit payments overtaking check or money orders, which in previous decades were much more commonly utilized. A multi-billion-dollar industry, the payments space has seen some of the most innovation and advances in recent years as companies look to push contactless technology with faster execution times. Read this Term through hundreds of shell companies, and provided US bank Wells Fargo with deceptive information for opening accounts.

“First Pay’s risk department ultimately failed to effectively screen out deceptive merchant applications submitted by a small set of fraudulent sales agents,” Jim Walden, Managing Partner of Walden Macht & Haran and lawyer for Ko, said.

“That failure caused substantial financial harm to both First Pay and Mr. Ko, who agreed to turn over his entire $100 million First Pay portfolio to First Data in 2014 so that the income could be used to repay consumers harmed by the dishonest activities of these fraudulent agents and merchants.”

Notably, the defendants neither admitted or denied any of the wrongdoings, and Wells Fargo was not named in the allegations.

First Data bought the merchant accounts of First Pay Solutions in May 2015, but allegedly turned a blind eye to all the shady activities. The company also appointed Ko as its vice president of strategic partnerships in January 2017, but he is no longer employed with the firm.

Fiserv bought First Data’s parent company last July in a $29.3 billion deal.