Merchant Account Underwriting Tools

RICO and Merchant Processors

The Racketeer Influenced and Corrupt Organizations (RICO) Act, Title 18, United States Code, Sections 1961-1968 was passed in 1970 to address organized crime, then primarily the Italian Mafia. con man 1For an extensive explanation by attorney Jeffrey E. Grell of this complex legislation see

For the purpose of this post it is timely to alert merchant account processors of how they might find themselves entangled in a prosecution that is far more serious than the customary FTC or CFPB civil actions.

Keeping in mind that those civil actions are frequently referred to the Department of Justice for investigation by the FBI and potential criminal charges, acquirers must be sure that underwriting and monitoring of merchant accounts is maximized.
Here, by attorneys Ori Lev and anjali Garg, are some lessons learned from 2015 enforcement actions.–lessons-learned-from-2015-deceptive-advertising-enforcement-in-the-consumer-finance-space-01-13-2016/.

I was recently reminded of the RICO provisions while reviewing several current FTC/CFPB cases that have included merchant processors as defendants. It appears to me, as a layman, that in these cases almost every box was checked to qualify for RICO prosecution.

1. Predicate Acts. A full definition of racketeering activity can be seen at 18 U.S. Code %1961. For our purpose here we will include several that are typical of merchant account fraud.
• section 1029 (relating to fraud and related activity in connection with access devices)
• section 1341 (relating to mail fraud).
• section 1343 (relating to wire fraud).
• section 1344 (relating to financial institution fraud).
• section 1956 (relating to the laundering of monetary instruments).

2. Pattern. A “pattern of racketeering activity” requires at least two acts of racketeering activity.

3. Relatedness
. To be related, the criminal acts that form the pattern must “have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics.”

4. Enterprise. Although an enterprise can be a legal entity, such as a partnership, corporation or association, it can also be an individual or simply a relatively loose-knit group of people or legal entities.fraud

5. Operation. An enterprise is “operated” not just by upper management but also by lower-rung participants in the enterprise who are under the direction of upper management. An enterprise also might be “operated” or “managed” by “others associated with” the enterprise who exert control over it. Liability under RICO is not limited to “upper management”:

6. Continuity. A RICO violation may demonstrate continuity over a closed period by proving a series of related predicates extending over a substantial period of time. Some courts have held that “a substantial period of time” may be as little as a year.

7. Injury. Documentation by victims of these fraudsters well illustrate that their injuries have not only been financial but also have emotionally devastated some of them.

8. Conspiracy. Anyone who agrees or conspires to pursue the same criminal objective can be held liable for a RICO violation.duress contract

My connections (only) can contact me for a case study.

One Response to RICO and Merchant Processors

  1. Case study offer has expired.

Leave a reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.