opinion

The ABCs of KYB and KYC

The ABCs of KYB and KYC

As a payment processor, we devote a lot of time and energy to applying two crucial principles: Know Your Business (KYB) and Know Your Customer (KYC). If you’ve engaged in this process, you know how difficult it can be, but we go through it to be sure we are onboarding a good merchant. After all, this important step is one of the first lines of defense in the fight against fraud. This month, let’s review three key practices that can help you make sure you know everything you need to know about the partners with whom you do business.

Audit Your Affiliates

Platforms should keep on file a sample agreement that each content management agency uses with their creators.

It only takes one bad merchant to take down an entire payment processor or bank. That’s why getting to know merchants is essential. Payment processors often take a comprehensive approach when onboarding merchants, conducting ongoing monitoring and using third parties to perform daily and weekly comprehensive checks. It’s important to make sure merchants are not involved in any illegal activity, especially since card schemes don’t tolerate it on their network.

Those same measures also comprise best practices for merchants to apply to their own business partners. You need to have a good handle on who your affiliate partners are. At a minimum, merchants should be gathering information like a proper address, bank account data and valid identification for their affiliates.

Additionally, all affiliate landing pages should be approved by the merchant before any traffic is accepted from them. At least once or twice a year, we receive a card brand inquiry regarding an affiliate landing page which has noncompliant content and is pushing sales to one of our compliant merchants. This demonstrates the importance of making sure affiliate landing pages meet your content requirements. One way you can protect yourself is to have policies in place regarding how you KYC your affiliates, approve their marketing pages and manage the traffic they send you.

Be Proactive

Merchants should also be proactive about conducting KYB on studios and third-party producers from which they license content. This includes reviewing on-set policies and verifying how they gather proper model release forms. The Free Speech Coalition website offers examples of best practices and release forms here. All content should be reviewed and approved prior to publishing, to ensure it meets card brand standards.

Cam platforms that rely on cam studios should follow the same best practices, gathering information on cam studio owners, including name, address and bank data. They should also have a deep understanding of how each studio is managed, how the models are treated and whether they have accessible copies of model release forms and/or 2257 adult content age verification information.

It is also important to understand the flow of funds in cam studios. For example, how are the studios paying their cam models? One way to do this is to ask for proof of payment to models. This also ensures the models are actually being paid for their work.

Collect Complete Information

The same concerns apply to fan sites. Many creators rely on content management agencies to help with the administration of their business. If you’re a fan platform relying on agencies to onboard their network of creators to your platform and handle admin, due diligence should be completed to understand how they manage their roster of creators.

Platforms should keep on file a sample agreement that each content management agency uses with their creators. If the agency is responsible for posting content and communication, does it understand the user-generated-content rules of the card brands? Card brands require fan sites to age-verify all who appear in content and review all content prior to posting.

While the adult industry provides many opportunities to work in a safe and secure environment, earn high salaries and work flexible schedules, it is imperative to know whom you’re working with. You and your payment partners can take control by collecting the right information and guaranteeing that you are all meeting the numerous legal and regulatory requirements.

Cathy Beardsley is president and CEO of Segpay, a merchant services provider offering a wide range of custom financial solutions including payment facilitator, direct merchant accounts and secure gateway services. Under her direction, Segpay has become one of four companies approved by Visa to operate as a high-risk internet payment services provider. Segpay offers secure turnkey solutions to accept online payments, with a guarantee that funds are kept safe and protected with its proprietary Fraud Mitigation System and customer service and support. For any questions or help, contact sales@segpay.com or compliance@segpay.com.

Related:  

Copyright © 2024 Adnet Media. All Rights Reserved. XBIZ is a trademark of Adnet Media.
Reproduction in whole or in part in any form or medium without express written permission is prohibited.

More Articles

opinion

An Ethical Approach to Global Tech Staffing

One thing my 24-year career as a technologist working to support the online adult entertainment industry has taught me about is the power of global staffing. Without a doubt, I have achieved significantly more business success as a direct result of hiring abroad.

Brad Mitchell ·
opinion

Finding the Right Payment Partner

Whenever I am talking with businesses that are just getting started, one particular question comes up a lot: “How do I get a merchant account?” It’s a simple question, but it has a complicated answer.

Jonathan Corona ·
opinion

The Taxman Cometh for Every Business

February may be the month of romance, but it is also a time when we need to think about something that inspires very little love: taxes. April is not far away, and the taxman is always waiting. This year, federal and most state income taxes are due Monday, April 15.

Cathy Beardsley ·
opinion

The Continuous Journey of Legal Compliance in Adult

The adult entertainment industry is teeming with opportunity but is also fraught with challenges, from anticipating consumer behavior to keeping up with technological innovation. The most labyrinthine of all challenges, however, is the world of legal compliance.

Corey D. Silverstein ·
profile

Alexzandra Kekesi Takes Charge as Aylo's Head of Community and Brand

While Alexzandra Kekesi was earning her bachelor’s degree in women’s studies from the Simone de Beauvoir Institute at Concordia University, feminist thinkers influenced her deeply, inspiring her passion for sex work advocacy.

Alejandro Freixes ·
opinion

New Year, New Tools for Tackling Chargebacks

Happy New Year! Looking back, 2023 saw some important developments for the industry. Visa lowered the limit on credit card surcharges to 3%, AI continued growing fast and Mastercard published an update to its Business Risk Assessment and Mitigation (BRAM) program.

Jonathan Corona ·
opinion

The Next Frontier in Computing, Storage Is Here

While I typically steer clear of diving too deeply into the technical nitty-gritty, in this month’s column I’m making an exception, because there’s a technological evolution underway that has the potential to fundamentally enhance technical outcomes and, more importantly, grow revenue.

Brad Mitchell ·
opinion

Raising Awareness and Taking Action Against Financial Discrimination

While foes of the adult entertainment industry often focus on “moral” concerns and perpetuate social stigmas, another form of attack can be equally or even more damaging: financial discrimination.

Corey D. Silverstein ·
opinion

Beyond DMCA Takedowns: Exploring Alternative Avenues

Most content creators recognize that inevitably, their content will be leaked on pirate sites, forums and file lockers. The most responsible and successful creators have therefore implemented a strategy to protect their valuable intellectual property.

Lawrence Walters ·
opinion

The Mainstreaming of Pleasure Products: Boom or Doom?

Not all that long ago, the idea that you might pick up a sex toy at the same drugstore or big box store where you do the rest of your shopping seemed unlikely at best. But today, with attitudes toward sexual wellness shifting, our category has hit the mainstream.

Sean Quinn ·
Show More