VISA Pulls Plug On ePassporte, Porn Webmasters

tsu doh nimh writes "Credit card giant VISA International has suspended its business with ePassporte, an Internet payment system widely used to pay adult Webmasters and a raft of other affiliate programs. A number of adult Webmaster forums are up in arms over the move because many of their funds are now stranded. Visa has been silent on the issue so far, but KrebsOnSecurity.com points to an e-mail from ePassporte founder Christopher Mallick saying the unexpected move by Visa wouldn't strand customers indefinitely. Mallick co-directed Middle Men, a Paramount film released in August that tells the story of his experience building one of the world's first porn site payment processing firms, as well as the Russian mobsters, porn stars and FBI agents he ran into along the way. Interestingly, the speculation so far is that Visa cut ties with ePassporte due to new anti-money laundering restrictions in the Credit Card Act of 2009, which affects prepaid cards and other payment card instruments that can be reloaded with funds at places other than financial institutions."

Comments

Re:Well duh

[Peeteriz]

Given the money that's there to be made, the legitimate business starts backing away only when the law requires to do so (TFA, new credit card act), involvement with mafia doesn't matter as long as Visa can legally pretend not to see it.

no worries...

[Kristopeit, Michael]

i was pissed when paypal did this to me in 2000... so i switched to neteller, then i was pissed when neteller did it to me in 2006, then i switched to epassporte, now i'll switch to one of the other major providers... most support the "pulse" network instead of visa or mastercard, and almost every ATM works with pulse.

nothing to see here except visa losing out on a lot of business because they let the government dictate how they do legal business in the name of stopping potential crime.

shame on you visa. you are pathetic.

Re:no worries...

[ravenspear]

Pulse is national payment network that processes most debit card transactions in the US.

http://en.wikipedia.org/wiki/Pulse_(interbank_network)

Re:no worries...

[Rophuine]

I was a software engineer working in a company which had a similar thing done to it by MasterCard (MC from here on). The circumstances may be similar or vastly different, but the program which triggered it was used mainly by online gambling services, and we provided customers with Maestro/Cirrus branded MCs.

The product was ostensibly a prepaid debit card for travellers. The melt-down started when an MC official at an international event received marketing material for the card, and called the help-desk. He was told all about the benefits of the card, including the ‘special’ benefits like being able to load gambling winnings onto it and then withdraw them as cash from US ATMs (I should stress that this was a program operated by our client, not by us; we were just the platform.)

It turns out that this is money-laundering. You just aren’t allowed to market that. So our client (who operated the program) was investigated, and then we (who owned the payment platform) were also investigated. While a handful of people were using the program legitimately, the vast majority were using it for its ‘special’ benefits. MC also found that we should have known about it, and we’d failed to do correct due diligence. The program was shut down immediately, and all cards were de-activated, as its primary purpose was to facilitate money-laundering (we received two hours’ warning, and I had a federal police officer standing behind me while I signed in and deactivated the card range). We lost our licence to access the MC network, and MC gave us 30 days to notify customers of legitimate programs and disconnect. We were successful in getting a court order extending this to 180 days.

MC has strict risk guidelines on this sort of thing. The integrity of the network is paramount: illegal money flows are targeted and stamped out vehemently. They would rather risk disconnecting thousands of legitimate cards than risk losing trust in a network which provides for billions of them.

The real problem is that it’s all private enterprise. Our contract with MC gave them all of these powers: if you don’t want to let MC have this sort of power over you, you don’t use their network. There is no right of appeal, especially for international partners (the court’s authority to even grant the time extension for our genuine legal programs was tenuous, and was only enforceable due to MC wanting to be nice to another party in the chain who was subject to Australian law).

I hope this is interesting information. If you want to know how the story ends, join the club: it’s still going. Perhaps you can visit David Tzvetkoff in a US prison and ask him if he knows.

I suppose what it really gets back to is that VISA is probably not doing this to comply with laws. They know that the best money for an organisation their size is to be made in massive, highly-trusted networks which are beyond reproach. They kick anyone off who might give them any kind of a smudge. Not just pr0n, obviously, I'm talking about money-laundering-style smudges. Which is not, of course, to say that this is what ePassporte was doing: there was neither trial nor opportunity to defend when MC came after us. It was "we're on our way, be ready to turn them off in front of a federal police officer when we arrive." They didn't have to prove that our client was doing anything wrong. They didn't have to prove that we should have known about it. They just decided that they were satisfied, end of story. We only got the extension from the court because they found that MC hadn't met the requirements under the contract to terminate with 30 days notice, and they had to fall back to the "we can kick you off just because we don't like the brand of office chairs you buy" 180 days.

Speaking as a former dating site peon...

[Anonymous Coward]

This kind of thing happens all the time for companies handling payment processing for adult sites. IIRC Chargeback rates tend to be pretty bad, and made worse by actual billing scams on the seedier sites; so while they're lucrative customers for the banks, they're also prone to falling foul of regulatory limits and having their merchant accounts suspended. The movie tie-in is probably the only reason this is considered newsworthy.

Re:outrageous

[Anonymous Coward]

It's cute how your name is commodore64_love and you think that there was no porn on the internet until the world wide web went graphical. I must have been imagining all those a.b.p.e. groups.

Re:outrageous

[bsDaemon]

I bet there were dirty stories and FTP servers housing content before the Web was even a fully-realized thought. Long before.

Re:outrageous

[boristdog]

Funny how we had internet before porn. The internet existed first (pure text), and porn didn't join the party until the mid-90s when the graphical web was taking off.

Ah, you poor, poor deluded soul.

You sound like someone who never downloaded ascii porn in the 1980's.

At 300 baud.

Re:Who the hell pays for pr0n?

[jpapon]

I pay for at least one site simply because it's quality is better than the free stuff.

I mean, I can appreciate production value as much as the next guy, but I'll take the hit & miss of sites like burningcamel.com, keezmovies.com, and so on before I make the mistake of giving my credit card to a porn site again. Those guys are almost universally crooks who will keep charging you until you just cancel your card and get a new number.

Re:outrageous

[Jah-Wren Ryel]

I bet there were dirty stories and FTP servers housing content before the Web was even a fully-realized thought. Long before.

No need to bet, I will testify. ASCII porn doesn't really count, but there were plenty of x-rated gifs (and other now mostly forgotten formats like .pic and .pcx).

Yes, back in the day we had to spend half an hour to download a single image but the waiting made it that much sweeeter.

Re:outrageous

[Minion of Eris]

hardly, you are probably too young to remeber ASCII graphics - http://www.google.ca/images?q=ascii+art&rls=com.microsoft:en-us&oe=UTF-8&startIndex=&startPage=1&redir_esc=&um=1&ie=UTF-8&source=univ&ei=xXCBTI-PFsufnAft2ZB_&sa=X&oi=image_result_group&ct=title&resnum=4&ved=0CDYQsAQwAw but there was porn in the text based interwebz

Re:Who the hell pays for pr0n?

[JustOK]

hence, one use of prepaid cards...

Re:outrageous

[rudy_wayne]

he internet existed first (pure text), and porn didn't join the party until the mid-90s when the graphical web was taking off.

I was downloading porn from usenet newsgroups starting in 1987. Sure, there was no snazzy Windows GUI and it was all uuencoded text that I had to decode into pictures. But in 1987 that was pretty cool and exciting.

Re:outrageous

[Ironhandx]

You do realize that the packets used for the most basic ping test are a few bits of an image of a topless pin up model, right?

Porn joined the internet party in the form of BBS's before the internet was even the internet. I have a record of the file transfer of a single playboy playmate image from 1987. Its the first porno I have a record of on the internet(what was the internet at the time), I keep it for nostalgic purposes, plus she's hot.

There is also a very good argument to be made that the internet would have taken a lot longer to go graphical at all if it wasn't for porn.

Also, didn't someone find ascii porn on like the second Univac system ever built?

Re:Good! Affiliate marketing should die.

[Dogtanian]

I blame it on Amazon, who first pushed this as a way for ordinary people to "monetize their web site" back in the early 90s.

I assume you mean the late 90s or early 2000s; the web was launched in 1990, but it wasn't until around 1994 that it started taking off (with very little commercialism at that time), and Amazon themselves didn't launch until '95!

Re:outrageous

[Dogtanian]

It's cute how your name is commodore64_love and you think that there was no porn on the internet until the world wide web went graphical.

Most people who grew up with 8-bit computers didn't have access to modems or online services, let alone the Internet, some weird academic thing until circa the mid-90s, which most of us had never even heard of.

That said, I do remember downloading porn from text-based bulletin boards when I first got on the net circa 1994....

Re:outrageous

[Lythrdskynrd]

and boobies before that...

( . )( . )

Porn Processing

[RWarrior(fobw)]

It's incredibly difficult (and expensive) to get credit card processing for an adult entertainment business, and the cartels (Visa/MC/Discover/Amex) don't want to make it easier. In my three years' work for a site dealing with just this kind of issue, here's what I found:

• You pretty much can't get processing in your own business name if you're up-front about what you do, in the United States.
• You can't get processing in Europe, either, unless you're actually in the EU. Opening a shell corporation won't help, and even then, it's also impossible.
• You might be able to get "high risk" processing outside of the United States, out of somewhere like Vietnam or the Philippines. If you do, you can expect games with your money.
• You can expect to have your bank hold on to your funds a minimum of three months. This is not something like a 5% rolling reserve. It is, instead, a 100% rolling reserve.
• You can expect your contract to say that when you end your contract (even at the end of term in the normal course of business), your processor can hold onto 100% of your money for an additional year, starting as soon as you give your required six months notice.
• You can expect your contract to say that you surrender your domain name to your processor in perpetuity.
• You can expect to pay as much as 25% of revenue for this "service."
• You can expect to find it impossible to open even a normal checking account into which to deposit your funds, because no bank in the universe will want to deal with you, simply because you run an adult business.
• About the only semi-reputable (caveat emptor) business that will do billing for adult websites is CCBill. You can expect to pay CCBill at LEAST 10% of your revenue, and if you want to take Visa, you have to pony up another $750 non-refundable startup fee, and a $500 annual fee, on top. Approximately 40% of adult transactions are Visa, so not accepting Visa isn't a viable option for most businesses.
• CCB's software absolutely sucks. It is bloated, slow, doesn't give good control over affiliates and their production, and doesn't produce usable reports. And, I have never once given an email address to CCBill (yes, I use unique addresses for such transactions) that didn't get sold to a spammer. This includes addresses I gave to them in a business relationship, not just buying a website subscription.
• Verified by Visa and MasterCard SecureCode, which are supposed to eliminate chargebacks, are not available to adult entertainment sites. No explanation has ever been given about why this is so, but if you run porn, you can't use these "enhanced security" services.
• CCBill supports only subscription-based services. They don't support physical good sales. Want to sell DVDs, t-shirts, photographic prints, USB keychains, or other goods along with your site subscriptions? Too bad.
• No well-known payment service aside from CCBill allows porn. This includes PayPal, Google Checkout, Moneybookers, and the rest. Want to sell legal second-hand DVDs on eBay? Good luck figuring out how to get paid. I have a warehouse full of stuff I basically can't sell because I can't get paid.

One of the reasons problems are so rampant in credit card processing in adult entertainment is that the cartels have made it nearly impossible to get legitimate processing, and so businesses that want to take credit cards have to resort to quasi-legal tactics to be able to run them. It becomes a self-fulfilling prophecy.

One of the things I looked into was the possibility of creating, essentially, a pornographer's bank. The bank would adhere to customary American banking law, but would explicitly accept legal adult entertainment business. The question we co