US Merchant Account Requirements: SSN’s & TIN’s

When submitting an application to create a new merchant account with a US based processor, merchants are asked to provide specific identifying details, including a Taxpayer Identification Number (TIN) and a Social Security Number (SSN).

A TIN is issued by the IRS to any sole proprietor, partnership, LLC or Corporation that applies for one. You can

While the Patriot Act does not specifically mandate that financial institutions must ask for a customer’s Social Security Number in order to set up a merchant account, the regulations, which took effect in 2003 and were implemented in accordance with Section 326 of the Act, require that all financial institutions establish a Customer Identification Program (CIP), to verify the identity of any individual who wishes to conduct financial transactions through their businesses.

These regulations govern banks and trust companies, credit unions, mutual funds, savings associations, futures brokers, and other similar financial institutions, including institutions that offer merchant accounts to companies for the purpose of accepting credit cards. An institution’s CIP requires that it gather identifying information about any individual seeking to open an account in order to engage in financial transactions, and that it further

(1) verify the identity of the individual creating the account such that the institution has reasonable certainty that it knows who the account holder is,

(2) establish and keep records of the information used to verify the identity of the account holder, and

(3) compare the identity of the account holder to lists provided by the government of known or suspected terrorists.

The purpose of these regulations is to allow the US government to work with financial institutions to prevent identity theft, money laundering, the financing of terrorist organizations and activities, and other types of fraud. A financial institution’s CIP is incorporated into its Bank Secrecy Act compliance program, which every US financial institution must have as a means of cooperating with the government to combat money laundering. Financial institutions are required to have procedures in place to ensure that they can verify a customer’s identity and establish that the customer does not appear on any government list of terrorists within a “reasonable time,” and to dictate under what circumstances the institution should refuse to open an account, close an account previously opened, or file a Suspicious Activity Report, based on its ability to successfully establish the identity of the customer.

Each financial institution develops its own CIP, which is then approved by its board of directors. As such, while the Patriot Act does not specifically require that a customer’s SSN must be provided in order to obtain a merchant account, most financial institutions consider a SSN to be a simple and reliable means of verifying identity, and may choose to deny service to a customer who does not wish to provide it. Using a SSN as a requirement for creating a merchant account has been demonstrated to be an effective means of discouraging criminal use of these accounts, and remains one of the easiest ways for financial institutions to comply with US government regulations regarding the verification of customer identity and fraud prevention.

US-Merchant-Account-Social-Security-Number

Furthermore, as we have outlined in several of our articles regarding personal credit, the SSN is also used to help the processing bank determine the credit worthiness of the potential merchant. The personal credit history demonstrates a signers ability to repay debts, and as we have discussed in several articles, a merchant account carries the risk of causing the processing bank a significant loss.

Lastly, since a US merchant account typically requires a personal guaranty (except for publically traded corporations or charities) to provide some protection for the processing bank against a loss, if the personal guarantor is not a US citizen, a US processing bank would have little legal recourse in attempting to recover a loss caused by a foreign citizen.

In summary, all US processing banks require a SSN in order to approve any merchant account; to confirm the identity of the signer, to determine the credit worthiness of the signer, and to provide an effective personal guaranty.

While this does make it difficult for individuals who are not US citizens to apply for US merchant accounts, international merchant accounts are subject to a different set of regulations, and thus remain an option for individuals without a SSN. One exception to this requirement, is that Canadian merchants can apply using their SIN, instead of a SSN, with a few select US based processing banks that Durango-Direct.com works with.

If you have any questions or would like more information regarding the application process for any of our partners, please do not hesitate to contact us.

 

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