Key takeaways
- Legal teams review contracts, assess regulatory requirements, and help PSPs manage legal risks across markets.
- In High-Risk payments, merchant onboarding requires checking business activities, ownership, and relevant operating permissions.
- Legal and Compliance work together, but their responsibilities differ.
- Legal support continues after launch, particularly when payment arrangements, partners or regulations change.
A payment service provider (PSP) can support bank transfers in a country and still be unable to serve a particular Forex broker. The integration works. But the broker's licence might not cover customers in its target market, or a local bank may exclude that business category.
First, the PSP must check its own permissions and those of its partners.
What does a legal team do at a payment service provider?
The legal team reviews agreements with merchants and payment partners. It also assesses whether proposed payment services are permitted in each market.
Legal and compliance often work on the same case, but their roles differ. Legal interprets legislation and negotiates contract terms. Compliance manages the controls used to meet regulatory requirements, including AML screening and monitoring. Risk assesses the financial exposure. The split varies between companies.
Contracts and partnerships
A merchant service agreement might provide for T+1 or T+7 settlement, a rolling reserve or the right to suspend payouts in certain circumstances. Legal checks these settlement terms, as well as the fees and liability clauses.
Banks and local PSPs have their own restrictions. A partner could accept ordinary retail transactions while refusing betting deposits. Legal needs to flag that before the commercial team promises access.
Suppose a partner suspends payouts. Operations identifies the affected transactions. Legal checks whether the contract allows the suspension and what must happen to funds already collected. It also checks whether the partner gave the required notice.
Legal involvement in High-Risk merchant onboarding
Even with complete company documents, High-Risk merchant onboarding can stall over licensing. A Forex broker may be registered in one country while serving customers elsewhere. Its authorisation may not cover every target market.
Compliance normally handles merchant due diligence, including Know Your Business (KYB) checks and customer due diligence (CDD). Depending on the rules and assessed risk, some cases also need enhanced due diligence (EDD).
Legal checks whether the merchant can offer its services in those markets and whether the PSP's partner agreements permit the proposed payments. If the broker lacks the necessary permission in one country, the PSP may need to exclude that market or delay onboarding.
Payment regulations across different markets
The legal requirements for payment service providers depend on the activity and the entities involved. Using a local payment partner can raise different issues, from holding customer funds to issuing e-money. A PSP's home-country registration doesn't automatically authorise it to provide every service abroad.
Across Asia, Africa and MENA, payment regulations vary by country. For cross-border payment compliance, Legal needs to establish which entity provides each service and whether local laws or partner contracts restrict it.
The UK's Financial Conduct Authority explains how authorisation requirements differ between payment activities. The FATF Recommendations set international AML standards, which countries implement through domestic law.
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Legal in day-to-day payment operations
A local partner flags suspicious activity and pauses a batch of payouts. Operations identifies the affected transactions. Compliance considers whether more checks or reporting are required; Risk reviews the financial exposure.
Legal examines the suspension clause and advises on what the PSP must tell the merchant. It also checks the contract's provisions for releasing held funds.
Legal may also review a new merchant entity or an amended payment processing agreement. Routine transaction monitoring and technical failures stay with the relevant teams.
FAQ about legal work
Can legal and compliance be handled by the same team?
Yes, if the PSP's structure and applicable rules allow it. Responsibilities and required independence must remain clear.
Who approves a High-Risk merchant?
It depends on the PSP's approval process. Legal advises on restrictions; Compliance and Risk complete their reviews. An authorised decision-maker makes the final call.
Does a PSP need a separate licence in every country?
Not necessarily. It depends on the services and local rules. Licensed local partners may help, but the arrangement still needs legal review.
Checklist: what should your PSP's legal team cover?
- Review merchant and partner agreements before signature.
- Check licences and permitted activities in target markets.
- Advise on legal questions raised during merchant due diligence.
- Confirm restrictions on payment methods and routes.
- Clarify liability for disputes, reserves and held funds.
- Review changes to merchant activities or partner contracts.
- Update agreements when relevant regulations change.
Planning a launch in a new market? SPAYZ.io works with High-Risk merchants across Asia, Africa and MENA. Contact our team to discuss available payment methods and onboarding requirements.
