Why it’s Common to Give a Social Security Number for a Merchant Account

Jan 6, 2016 by

Why it’s Common to Give a Social Security Number for a Merchant Account

By Samuel Phineas Upham

When you want to open a retail store, it becomes important to have some kind of point of sale device where you can charge customers money to purchase items at your store. You’ll need a merchant account in order to move those funds, and you’ll be asked to give your social security number if you plan to get one. This makes some people understandably nervous, but is actually related to Federal requirements banks need to uphold in order to continue doing business.

Section 326 of the Patriot Act

After President Bush signed the Patriot Act into law, several provisions were enacted with the goal of making it harder for terrorists and criminals to move money around banks. Section 326 of the Act deals specifically with how financial institutions identify their customers, and calls on banks to set minimal standards they can use to study and identify their clientele. The simplest way, in the eyes of banks, is using a social security number as a method to identify the owner of a business.

Most legal business owners would never consider using their own terminal as a means to launder money, but the law allows for the possibility of this occurring and gives law enforcement the power to put a stop to it. Every application for a merchant account must undergo a rigorous process of underwriting by the bank, or the application is rejected at some point during the approvals process.

The Patriot Act has generally been the source of controversy, especially in the digital age with so much information moving online. How banks identify business owners will no doubt change in the very near future, but it’s likely the provisions will remain in order to curb the growing threat of terrorism.

Samuel Phineas Uphamis an investor from NYC and SF. You may contact Phin on his Samual Phineas Upham website or Linkedin page.

Related Posts


Share This

Leave a Reply

Your email address will not be published. Required fields are marked *