NEW YORK (Reuters) – First Data Merchant Services LLC and a former executive will pay nearly $40.3 million to settle U.S. civil charges they knowingly processed payments and helped launder credit card transactions in four scams that harmed hundreds of thousands of consumers.
The Federal Trade Commission said on Tuesday First Data, one of the world’s largest payment processors, will pay $40 million, while Chi “Vincent” Ko will pay $270,374, with the sums used to provide refunds to consumers.
First Data also agreed to improve its screening of “high-risk” merchant clients, and hire a monitor for three years.
Neither defendant admitted or denied wrongdoing. The settlements require approval by a Manhattan federal judge.
First Data is part of Wisconsin-based Fiserv Inc, which acquired parent First Data Corp for $29.3 billion in stock last July.
First Data “repeatedly looked the other way” from 2012 to 2014 as First Pay Solutions LLC, which Ko founded, opened hundreds of accounts for merchants engaged in fraud, the FTC said.
Ko would open accounts under false names, let merchants process payments through hundreds of shell companies, and provide Wells Fargo & Co with deceptive information to open the accounts, it said.
Three scams were subjects of prior FTC enforcement actions, and the fourth was a subject of a federal criminal prosecution, the agency said.
First Data bought First Pay’s merchant accounts and hired most of its staff in May 2015, and hired Ko as vice president of strategic partnerships in January 2017. He is no longer employed there. Wells Fargo was not accused of wrongdoing.
Fiserv said the settlement was in the best interest of First Data, its clients and their customers.
Jim Walden, a lawyer for Ko, said his client denied knowing First Pay had allowed a small number of “rogue independent agents” to sign up dishonest merchants.
(Reporting by Jonathan Stempel in New York; Editing by Chris Reese and Bernadette Baum)
