Credit Card Companies Become Reluctant Web Regulators

Who Should Monitor the Internet? For some time now, the issue has been binding on businesses, regulators and activists.

Social networks spend billions to moderate the content posted on their platforms, but are still criticized for either not removing enough toxic material or for stifling free speech. They are not the only ones tackling the problem. Banks and credit card companies are also finding themselves playing a bigger role in what is being said and done in the public arena – to their unease and that of their customers.

Now the censorship limit is stretching further, in the area of ​​pornography. Starting October 15, adult websites around the world will need to verify the age and identity of anyone in a photo or video, as well as the identity of the person uploading it. They will need to operate a quick complaints process and will need to review all content before publication. These requirements are not imposed by regulators but by Mastercard, a credit card giant.

Websites can always choose not to work with Mastercard. But given that the company handles around 30% of all card payments made outside of China, that would be costly.

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Visa, which still handles 60% of payments, is also taking a tougher line on adult sites. And the trend goes beyond porn. In the darkest corners of the web and in industries where the law is unclear or out of date, financial firms find themselves acting as de facto regulators.

Since the turn of the century, “payments have become a tool of national and international policy,” says Aaron Klein of the Brookings Institution, a think tank. After the attacks of September 11, 2001, the United States introduced new anti-money laundering rules and more targeted sanctions. This system – a “21st century precision-guided munition,” as a former CIA chief called it – forces financial firms to block payments to individuals on a list that is now 1,604 pages long.

Around the same time, governments started turning to banks for help at home. A craze for online poker prompted the America’s Unlawful Internet Gambling Enforcement Act of 2006, which placed the responsibility for blocking transactions not with Internet service providers who allowed access to poker sites, but with corporations. which enabled the payments. While most states in the United States have legalized the cannabis industry in one form or another, its growth has been nipped in the bud by federal laws that deter banks from dealing with marijuana tycoons.

The fact of entrusting the execution tasks to the companies relieves the taxpayer of part of the costs. Meanwhile, corporate compliance departments have exploded. It is not uncommon for large banks such as HSBC or JPMorgan Chase to employ 3,000 to 5,000 specialists focused on fighting financial crime, and over 20,000 in total in risk and compliance. In 2017, Accenture, a consulting firm, estimated that tech companies employed around 100,000 content moderators.

The effect is also to relieve politicians from making difficult decisions. “Policy making involves building coalitions and building societal consensus on difficult issues. It has become more difficult in America over the past two decades, ”says Klein. When banks refuse to deal with a customer in an area like pornography or gambling because of “reputational risk”, it sometimes means “a banking regulator [has been] whispering to them, “We don’t like you being in this business,” says Greg Baer of the Bank Policy Institute, an American industry body.

Activists also lobbied, forcing companies to abandon unpopular customers. In January, following an outcry over a riot on Capitol Hill, Deutsche Bank and Signature Bank ended their relationship with then-President Donald Trump, whom Signature called to resign. Trump has likely found other banks willing to work with him.

But in some industries enough banks have looked up that this can be a problem. In August, OnlyFans, a site known for its adult content, said it would no longer allow explicit material due to pressure from partners such as BNY Mellon, Metro Bank and JPMorgan (none of whom have commented) . Ultimately, the ban was overturned, after outraged pro-porn activists turned out to be even louder than anti-ones.

Visa and Mastercard’s quasi-duopoly on card payments makes their decisions more powerful – and businesses are prime targets for protesters. In 2019, SumOfUs, a left-wing lobby group, tabled a proposal at Mastercard’s annual meeting to stop payments to far-right groups. (The proposal was rejected.)

Thirty-four women are suing Visa with the owners of Pornhub, an adult site they say hosted images without their consent. Illegal pornography sites “care more about their finances than the law,” says Laila Mickelwait, whose Justice Fund helps victims of sexual abuse litigate. And, she adds, when financial companies change their policies, it applies globally. Last year, Visa and Mastercard cut Pornhub for hosting potentially illegal content.

Payments companies in particular face a philosophical dilemma. “On the one hand, they try to be very open, accepting, ready to facilitate payments for anyone. They don’t take any political or moral stance, ”says Lisa Ellis of MoffettNathanson, a research firm. “But on the other hand, they also feel like they have a very strong responsibility in making sure that they don’t help or promote any sort of crime.”

Visa and Mastercard both claim that as global businesses their guiding principle is local legality. (This may come as a surprise: One executive remembers being told by clients in a Scandinavian country that bestiality was legal there at the time.)

Things are not always black and white. In 2017, after a far-right march in Charlottesville, Virginia, Mastercard ended the use of its cards on websites that had made “specific threats or incited[d] violence ”, but continued to deal with other sites labeled hate groups. “Our standard is whether a trader’s activity is legal, even when we don’t agree with what they say or do,” the company said at the time.

In gray areas, they have reason to err on the side of caution. The liability risk of payment networks tends to be low because they operate remotely from merchants. But being named in a sex trafficking complaint or accused of aiding the Nazis doesn’t look good.

By working with an adult limit site, for example, there are “not a lot of pros and a lot of cons,” says Ellis. And in legally sensitive areas, it may be cheaper to issue a blanket ban than to choose all the tough cases. Banks can avoid countries that are not embargoed but have a lot of people on the banned list, “to minimize the burden of determining whether every transaction is compliant,” says Jonathan Cross of Herbert Smith Freehills, a firm of ‘lawyers.

In policy areas where the law has yet to catch up, financial companies may end up writing regulations themselves. Some cases are trivial: Two years ago, Mastercard introduced rules for companies offering free trials, requiring them to alert customers before payments started. But other policies involve real trade-offs between values ​​such as freedom of expression and security.

Mastercard’s requirement that adult sites filter content before posting should help weed out illegal material, but will likely mean less of the legal type as well. The company suggests that it will cut sites that use artificial intelligence to “nude” dressed images, which in most countries is not against the law. An executive at another company wonders whether such decisions should be made by governments instead. “Where it’s gray, who would you rather make the decisions?” ” he asks.

New dilemmas continue to emerge. Klein points to the growing problem of email scams targeting vulnerable seniors. Financial firms are under pressure to stop transferring funds to crooks, but also to respect the autonomy of older clients. In March, a group of banks in Australia called for clearer laws on the matter.

As long as the legislation lags behind, financial institutions will be left in a difficult position: either accused of being the “moral police,” as one executive puts it, or of allowing wrongdoing. As Richard Haythornthwaite, then president of Mastercard, told protesters at the company’s 2019 annual meeting: “If it’s legal, then we have to respect this transaction. If this is something that is against the grain of society, it is up to society to rise up and change the law.

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