With identify theft on the rise, people are guarding their Social Security Numbers and personal information more closely than ever. Being asked to provide a Social Security Number raises a red flag and certainly a fear of how the Social Security Number might be used and how it will be protected. While processing the applications of hundreds of new merchants in any given month, Chosen Payments routinely asks new merchants to provide their Social Security Number and their home address. While we certainly understand the reluctance of people who don’t want to provide this very personal information, the request is not something that a Merchant Services Provider requests simply to “have on file.”
The federal government mandated that MSPs request Social Security Numbers as part of the USA PATRIOT Act passed in 2001. SSNs are used to verify applicant identities to protect against illicit activities.
The Underwriting Process
When a person or a company makes a decision to accept credit cards, they must open a Merchant Account through an application process. The application process includes underwriting that verifies your Social Security Number and home address to protect against illicit financial activities such as money laundering. It is a formality that is required by all banks and credit card processing companies. Many other factors are reviewed to make sure the Merchant Account is truly held by a business and that the owners or others in control of the Merchant Account are financially solvent. As you might know, being a merchant with a credit card terminal also gives you the ability to issue refunds or credit to accounts. If a credit is issued from a merchant terminal and there are not sufficient funds in the merchant’s account to cover the credit issued, someone must be liable to pay the bank back.
What Do You Do With my Social Security Number?
Providing a Social Security Number for identity verification purposes is specifically required by Section 326 of the USA PATRIOT Act that was signed into law in October 2001 in response to the events of September 11. The Act is enforced by the Office of Foreign Assets Control which is a branch of the U.S. Department of the Treasury. The Treasury has oversight of all financial and banking transactions within the United States. Because Merchant Accounts are used to move money from bank to bank through electronic means, they are monitored by the Treasury.
In order to comply with the mandate, financial institutions and credit card processors are tasked with having a Customer Identification Program (CIP) in place that contains measures to verify the identities of anyone looking to open an account and provides this information to government authorities. Someone in an organization must be responsible, just as someone in each company has the authority to sign company checks and perform other banking duties. Without such a program in place, there would be no way for our government to have effective oversight of money-laundering, drug trafficking, or potential acts of terrorism from receiving or transferring funds between bank accounts.
Chosen Payments works with First Data as an acquiring bank or, in clearer terms, the bank that immediately moves money to your bank account. First Data then collects money from the cardholder’s issuing bank such as Wells Fargo or Citibank to reimburse them for advancing money to merchants. First Data requires Chosen Payments (and all other credit card processors) to obtain this information as part of the underwriting process. In some rare cases, another Tax Identification Number (TIN) might be used for very large corporations, but the most common form of identification is the Social Security Number of the person applying for the Merchant Account or a person financially responsible for the business.
Should you have questions about how Merchant Accounts work or how to apply to do business with Chosen Payments, please give us a call at 855-4CHOSEN or visit www.chosenpayments.com.