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Osterman: FDIC’s Supervisory Approach to Banks’ Third-Party Relationships

Jaclyn Jaeger | July 28, 2014

Compliance officers at financial institutions seeking insight on the Federal Deposit Insurance Corporation’s supervisory approach to banks' relationships with third-party payment processors will want to pay attention to recent speech given by FDIC acting general counsel Richard Osterman.

In a speech this month before the Subcommittee on Oversight and Investigations Committee on Financial Services, Osterman acknowledged the challenges and risks financial institutions face when engaging with third-party payment processors (TPPP), who “may have relationships with hundreds or even thousands of merchant clients for which they initiate transactions,” he said. “The vast majority of transactions passing through financial institutions and payment processors are legitimate transactions initiated by reputable merchants.”

Where a third party initiates a transaction that is not legitimate, however, the bank “can...

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