Emerging Payment Risks Flashcards

Which regulatory framework specifically governs stablecoin issuers in the US as of recent legislative proposals?

Answer: State money transmitter licenses with potential federal overlay

Stablecoin issuers currently operate under state money transmitter licensing, while federal legislation has proposed adding a federal overlay requiring reserve backing and prudential supervision.

A merchant notices an unusual spike in chargebacks originating from transactions made via a Buy Now, Pay Later (BNPL) provider. What is the most likely root cause?

Answer: Friendly fraud by consumers exploiting BNPL's split payment structure

BNPL's deferred payment model creates incentives for friendly fraud, where consumers dispute charges after receiving goods to avoid installment payments.

What is 'transaction laundering' in the context of emerging payment risks?

Answer: An undisclosed merchant processing transactions through another merchant's account

Transaction laundering occurs when an undisclosed merchant routes card transactions through a registered merchant's account, hiding the true nature of goods or services sold.

Which feature of Central Bank Digital Currencies (CBDCs) poses the greatest privacy risk to payment ecosystem participants?

Answer: Full transactional visibility by the issuing central bank

CBDCs issued and tracked by central banks can give governments complete visibility into individual payment flows, raising significant civil liberties and surveillance concerns.

An APRP candidate is analyzing risks in open banking ecosystems. Which threat vector is most unique to open banking compared to traditional payments?

Answer: Third-party API exploitation exposing consumer account data

Open banking's reliance on third-party API access to consumer accounts creates novel attack surfaces where a compromised API or malicious third-party provider can expose broad account data.

Which risk does 'pay-by-bank' (account-to-account payments) eliminate compared to card-based payments?

Answer: Chargeback risk from card network dispute rules

Pay-by-bank transactions bypass card networks entirely, meaning merchants are not subject to card network chargeback rules, though other dispute mechanisms may still apply.

A payment risk analyst is reviewing a DeFi lending protocol that integrates with fiat on-ramps. What is the primary BSA/AML concern?

Answer: Anonymity of smart contract counterparties making CDD impossible

DeFi protocols typically involve pseudonymous or anonymous counterparties in smart contracts, making Customer Due Diligence (CDD) and beneficial ownership identification extremely difficult.