Payment processors must follow a combination of financial, security, and operational regulations. These protect merchants, customers, and financial institutions.
1. PCI DSS – Payment Card Industry Data Security Standard
What it is: A global standard that ensures companies safely handle credit card data.
Who requires it: Credit card companies like Visa, MasterCard, American Express.
What it covers:
Encrypting cardholder data
Regular system scanning and testing
Access control policies
Why it matters: Prevents data breaches and fraud when handling card payments.
Any business that stores, processes, or transmits credit card data must comply.
2. NACHA Rules – National Automated Clearing House Association
What it is: Governs how ACH (bank-to-bank) payments work in the U.S.
What it includes:
Customer authorization requirements
Timeframes for ACH processing and returns
Data security and fraud prevention
Why it matters: Ensures secure and accurate ACH transactions.
Merchants must obtain proper authorization before debiting a customer’s bank account.
3. KYC / KYB / AML – Identity & Risk Regulations
KYC (Know Your Customer)
Verifies the identity of individual clients
KYB (Know Your Business)
Verifies the identity and legitimacy of business clients
AML (Anti-Money Laundering)
Prevents illegal activity like fraud, terrorism financing, or hiding stolen money
Why it matters: Helps payment processors avoid being used for criminal activity.
Payment processors like CSG Forte collect business info, government IDs, bank records, etc. as part of these checks.
4. GLBA – Gramm-Leach-Bliley Act
What it is: A U.S. law requiring financial institutions to protect consumer data.
What it includes:
Data privacy policies
Sharing limitations
Safeguards for customer records
Helps ensure your personal and financial information stays private.
5. OFAC – Office of Foreign Assets Control
What it is: U.S. government agency that enforces sanctions and watch lists.
Why it matters: Payment processors must ensure they don’t process payments to/from blocked or high-risk individuals or countries.
This protects the U.S. financial system from being used in prohibited transactions.
6. IRS Reporting / Tax Regulations
Processors are required to report transaction volumes to the IRS (Form 1099-K).
Helps prevent tax fraud and ensure transparency in income reporting.
Summary Table
| Regulation | Focus Area | Applies To |
|---|---|---|
| PCI DSS | Credit card data security | Merchants & processors |
| NACHA | ACH rules & formatting | ACH processors & originators |
| KYC/KYB | Identity verification | All customers & merchants |
| AML | Preventing illegal transactions | All financial entities |
| GLBA | Data privacy & sharing | Financial institutions |
| OFAC | Sanctions compliance | U.S.-based financial entities |
| IRS Rules | Tax reporting | Processors & high-volume merchants |