1. The Legal Mechanics of Payment Fraud
The prosecution of merchant fraud relies on proving that the merchant made material misrepresentations to the acquiring bank regarding the nature of their business or the identity of the owners.
Federal prosecutors utilize the Bank Fraud statute (18 U.S.C. Section 1344) which carries a penalty of up to thirty years in prison. They argue that by lying on a merchant application the defendant defrauded a financial institution.
We defend against these charges by attacking the element of materiality and intent. We argue that the alleged misrepresentation did not pose a risk of loss to the bank. We also litigate the concept of "intended loss." If a merchant provided a service and the customers were happy we argue there is no fraud even if the merchant account was obtained through a straw man. We distinguish between regulatory non-compliance and criminal intent to steal.
Transaction Laundering and Factoring
Transaction laundering involves using a legitimate merchant account to process payments for another business that cannot get an account usually due to illegality or high risk. This is the digital equivalent of money laundering.
We defend clients accused of factoring. We argue that they were acting as a payment aggregator or a marketplace rather than a launderer. We analyze the contractual relationships. If the merchant had a contract to resell goods for a third party we argue that the transactions were authorized. We challenge the government's characterization of the funds as illicit proceeds. We demonstrate that the underlying transactions were for real goods and services thereby negating the money laundering charge.
Bust-Out Schemes
A bust-out scheme occurs when a merchant establishes a history of good payments to increase their processing limits and then floods the system with fraudulent transactions before abandoning the account and disappearing with the cash.
We defend against bust-out allegations by proving the legitimacy of the business failure. We present financial records to show that the business collapsed due to market forces or supply chain issues not a premeditated plan to defraud. We show that the merchant attempted to fulfill orders or issue refunds. We argue that insolvency is not a crime. We differentiate between a business that failed while owing money and a business that was built to steal.
2. The Match List and Civil Asset Forfeiture
Placement on the MATCH list is often devastating for a business, as it effectively prevents a merchant from obtaining payment processing services across major networks. Once listed, the ability to operate, especially in e-commerce or card-based environments, can be severely restricted.
These listings typically occur after a processor terminates a merchant relationship for alleged fraud or excessive chargebacks. However, the decision is not always based on a thorough or fair investigation.
In response, we challenge both the basis and process behind the listing. This may include pursuing claims where there is evidence of insufficient review, incorrect categorization, or failure to follow contractual obligations. We also address the issue of withheld funds, such as rolling reserves and pending settlements, which processors may retain for extended periods.
The objective is to restore processing capability where possible and recover funds that are improperly held, while ensuring that decisions affecting a business’s viability are subject to proper scrutiny.
Fighting the Tmf/Match Listing
The standards for placing a merchant on the MATCH list are strict but often ignored by risk managers who pull the trigger too fast.
We demand the evidence supporting the listing. If the processor claims excessive chargebacks we audit the dispute data. We often find that the chargebacks were caused by a technical error or a friendly fraud attack rather than merchant error. We negotiate directly with the legal department of the card brands (Visa/Mastercard) and the acquiring bank to remove the listing. We seek injunctive relief to restore the processing ability of the business while the dispute is pending.
Recovering Seized Merchant Funds
When a processor suspects fraud they freeze all funds in the pipeline. This can amount to millions of dollars in working capital.
We challenge the contractual right of the processor to hold these funds indefinitely. We argue that the hold is punitive and exceeds the potential liability for chargebacks. We file actions for conversion and breach of contract. We demonstrate that the processor is holding the money to enrich themselves rather than to cover risk. We force the release of the funds so that the business can pay its vendors and employees.
3. Regulatory Compliance and Iso Defense
Independent Sales Organizations (ISOs) and Payment Facilitators (PayFacs) face unique liability when the merchants they board commit fraud.
The Federal Trade Commission (FTC) and the DOJ often target the ISO for "aiding and abetting" the fraud of their merchants. They argue that the ISO ignored red flags during the underwriting process.
We defend ISOs and PayFacs. We review their Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols. We prove that they followed industry standards.
Defense against Regulatory Enforcement
We represent clients in investigations by the FTC and the Consumer Financial Protection Bureau (CFPB). These agencies seek to hold the processor liable for consumer losses.
We argue that the processor is a neutral infrastructure provider not a guarantor of the merchant's conduct. We demonstrate the robust monitoring systems our client uses to detect fraud. We show that once the fraud was detected the ISO acted immediately to shut it down. We negotiate consent decrees that allow the ISO to stay in business without admitting liability.
Underwriting and Due Diligence Defense
The government often claims that the ISO "should have known" the merchant was fraudulent. This is the willful blindness theory.
We defend the underwriting decisions. We present the dossier that was collected at the time of boarding. We show that the merchant provided falsified documents that would have fooled any reasonable underwriter. We argue that the ISO was also a victim of the merchant's deception. We protect the license and the reputation of the payment professional.
4. Why Clients Choose Sjkp Llp for Merchant Fraud
At SJKP LLP, we combine the technical insight of a payments consultant with the litigation strength of a federal defense practice to protect the operational lifeline of your business. Merchant fraud allegations are often driven by misinterpretations of complex transaction flows, and we ensure that automated risk assessments do not dictate the outcome.
Our approach is grounded in a deep understanding of the payments ecosystem. We distinguish between regulatory or compliance issues, such as MCC code concerns, and actual criminal exposure. By analyzing transaction paths, ACH activity, and processor behavior, we build a clear picture of what occurred and challenge inaccurate conclusions.
We act quickly to stabilize the situation, including pursuing relief from account freezes and engaging with financial institutions or regulators. Where investigations arise, we focus on demonstrating the legitimacy of the business and addressing concerns before they escalate.
Whether confronting a MATCH listing or responding to scrutiny from enforcement authorities, the goal is to provide precise, strategic advocacy that protects both business continuity and legal standing in a highly regulated industry.
09 Jan, 2026
