Material Connections LLC

Building Compliance and Risk Functions for a Wholesale ISO

Background:

A Wholesale Independent Sales Organization (ISO), hereafter referred to as “WholesaleISO,” decided to take on direct liability for its merchant portfolio. However, WholesaleISO needed to develop a comprehensive credit risk policy and incorporate external verification sources to build out its Compliance and Risk functions in-house.

Challenge:

WholesaleISO faced the daunting task of establishing a robust compliance and risk management framework from scratch, ensuring it could manage and mitigate the risks associated with taking on direct liability for its merchants.

Solution:

Material Connections LLC  provided strategic guidance and operational support:

  1. Credit Risk Policy Development: Drafted a comprehensive credit risk policy tailored to WholesaleISO’s business model and risk appetite, outlining procedures for merchant underwriting, monitoring, and risk mitigation.
  2. Integration of External Verification Sources: Recommended and facilitated the integration of reputable external verification sources to enhance the ISO’s ability to conduct thorough merchant due diligence and ongoing monitoring.
  3. Compliance and Risk Framework Establishment: Assisted in establishing an in-house Compliance and Risk function, including the development of policies, procedures, and training programs for staff.
  4. Technology Solutions: Advised on technology solutions to automate and streamline compliance and risk management processes, enhancing efficiency and accuracy.

Outcome:

WholesaleISO successfully built out its Compliance and Risk functions, incorporating a robust credit risk policy and leveraging external verification sources for enhanced due diligence. This strategic development enabled WholesaleISO to confidently manage the risks associated with direct liability, positioning it for sustainable growth and success in the payments industry.