High-risk merchant compliance support

Research steps and summary:

Research steps and summary:

Performed broad web search and content extraction aimed at

federal regulator guidance (FinCEN/BSA/AML, OFAC), card network rules (Visa/Mastercard), PCI-DSS, state licensing (money transmitter, cannabis/CBD, gambling), payment processor policies, and practical compliance controls (KYC/KYB, transaction monitoring, SARs, chargeback mitigation). I instructed searches to prioritize authoritative sources, industry guidance, and state-specific licensing information, and to cover common high-risk verticals (adult, cannabis/CBD, gambling, crypto, travel, subscriptions, nutraceuticals/ supplements, telemedicine, affiliates/marketing).

Key findings (compressed)

- Definition and drivers of "high-risk": designation comes from industry vertical, financial stability, chargeback/fraud history, processing model (card-not-present, cross-border), and regulatory exposure. High-risk merchants commonly face higher fees, rolling reserves, stricter contract terms, and enhanced underwriting.- Card network programs and consequences: Visa and Mastercard maintain specialized programs and controls for high-risk merchants (e.g., Visa Integrity Risk Program/VIRP and Mastercard BRAM/MATCH). Non-compliance can lead to monitoring, placement on MATCH, limits or termination.- Core regulatory frameworks to address: PCI DSS for card data security; Bank Secrecy Act (BSA)/FinCEN AML obligations for suspicious activity monitoring and SAR filing where applicable (including FinCEN guidance relevant to cannabis-related businesses); OFAC sanctions screening requirements; state consumer protection laws and advertising rules.- State licensing and vertical-specific rules matter: Money transmitter licensing is state-by-state and often required for payments businesses or where stored value/crypto/third-party payouts are involved. Cannabis/CBD remain subject to a patchwork of state laws and unique banking guidance (FinCEN cannabis-related business guidance); online gambling legality and licensing vary by state; CBD/hemp product legality and labeling requirements differ across states and at federal level (FDA/FTC enforcement actions for claims).- Practical compliance controls and onboarding documentation: robust KYC/KYB (beneficial ownership), enhanced due diligence for high-risk owners/verticals, transaction monitoring and velocity/threshold rules, chargeback mitigation processes, PCI DSS scope reduction and evidence of compliance, OFAC & sanctions screening, clear refund/cancellation and customer communications, records retention and audit trails, and maintaining financial documentation (bank statements, business plan, licensing).- Payment provider selection and remediation: Use processors and acquirers that specialize in the merchant’s vertical; prepare required documentation (licenses, statements, processing history); expect higher fees and negotiate terms; consider chargeback mitigation and fraud tools; maintain transparent communications with processor.- Compliance program and next steps: implement policies (KYC/KYB, AML, sanctions screening), assign responsible personnel, deploy monitoring and alerting (fraud and AML), document processes and remediation steps, prepare for onboarding and periodic reviews, and consult counsel for state licensing and vertical-specific regulatory advice.

Recommended immediate actions for US business owners / LLC founders (practical checklist)

- Identify whether your vertical and business model is commonly designated high-risk and which MCC(s) apply.- Compile incorporation documents, business licenses, bank statements, processing history, product/service descriptions, refund/cancellation policies, and beneficial ownership details.- Implement or verify PCI DSS compliance; scope cardholder data and apply SAQ/attestation as required.- Put in place KYC/KYB processes, enhanced due diligence for flagged customers/owners, and AML/transaction monitoring rules; plan for SAR filing capability if applicable.- Deploy OFAC/sanctions screening and clear procedures for handling hits.- Build a chargeback prevention and dispute playbook and choose tools for alerts/representment.- Check state-specific licensing (money transmitter, cannabis, gambling, crypto) and consult counsel where licensing is required.- Choose a payment partner experienced in your vertical and prepare the documentation they request.Caveat: This research step collected open-source guidance and industry materials; for final state-by-state licensing matrix and legally binding interpretations you should consult licensed attorneys and state regulator websites because requirements are detailed and change frequently.