Payment Challenges for MSBs: Navigating High-Risk Acquiring in the EEA and UK

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In the iGaming sector, companies operating under a MSB license frequently face significant challenges when it comes to integrating acquiring solutions for high-risk traffic in the EEA and UK. The high-risk nature of these transactions demands strict compliance protocols, especially under the rigorous standards of PSD2 and AML.


🔹 MSB Licenses and Market Perception: MSB licenses, particularly from Canada, are often viewed with suspicion by European acquirers and banks. Despite formal compliance with AML and CFT standards, these licenses are classified as "light-touch regulation," placing them under increased scrutiny from acquiring banks. Consequently, the UBO and company directors are subject to EDD procedures.


🔹 Compliance and Regulatory Risks: The presence of UBOs from CIS countries adds another layer of complexity, automatically categorizing the entity as high-risk. European payment institutions are risk-averse and take into account the jurisdictions of the beneficial owners and shareholders. Comprehensive transparency is required regarding the source of funds, leading to in-depth scrutiny of capital flow structures, beneficiaries, and KYC at every level of the transaction chain.


🔹 Alternative Jurisdictions for Problem-Solving: Faced with roadblocks in the EEA and UK, some operators explore alternative setups through EMI or PSP in regions like GCC or Asia, where MSB regulations may be more lenient. For instance, Bahrain and Laos present options with more flexible rules for high-risk processing. However, this path demands well-structured compliance strategies to meet FATF guidelines while adhering to European regulatory standards for processing euro and dollar transactions.


🔹 Challenges with SEPA and SWIFT Processing: Even after successfully integrating with alternative acquiring and PSP systems, MSBs face challenges ensuring legitimate and transparent processing through SEPA and SWIFT networks. Utilizing triangulation processing models (three-party processing) via intermediate EMI/PSP institutions may offer a temporary solution but requires flawless compliance frameworks to minimize reputational risks and avoid sanctions.


🔹 Optimization Strategies: Operators should consider employing a structured SPI model to simplify processing within the EEA. This model could serve as a foundation for building a more flexible and scalable financial structure, minimizing reputational risks and better aligning with European regulatory standards while maintaining the ability to process high-risk transactions.


With tightening regulatory frameworks for high-risk sectors such as iGaming, companies must continually reassess their strategies for payment processing and acquiring. Flexibility and adaptation are key to navigating these complex landscapes.


#iGaming #MSB #Payments #HighRisk #Fintech #PSD2 #AMLD #EDD #KYC #AML #SEPA #SWIFT #EMI #PSP #Triangulation #FATF #EEA #UK

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