6 ms·

I have a IngDirect (now CapitalOne360) checking account, which for many years was attached to Paypal and Google Checkout for receiving payments for Bingo Card C

by patio11 14y ago

I have a IngDirect (now CapitalOne360) checking account, which for many years was attached to Paypal and Google Checkout for receiving payments for Bingo Card Creator. One day, I got a call from their fraud/security department. Paraphrasing: "We know you're clean and well-established with us, but this use of the account with two incoming transfers a day is outside of our risk parameters, so you've got 30 days to move off it for your business use. We don't want this business." It's highly likely that Bitfloor was receiving many times that volume from many more payers with less history and, let me be charitable here, less ability to convince the fraud department that there was a legitimate business causing the deposits. It was obvious they were going to be shut down. P.S. If any of you think this won't happen to Mt. Gox I encourage you to consider "How high do I rate my understanding of risk controls and regulation at Japanese commercial banks?"

trevorcreech 14y ago
Where do your BCC payments go now?
- patio11 14y ago
  A business checking account at Bank of America, currently. I should probably have two of them, technically, since I have two LLCs now, but I haven't gotten around to that yet.
  - jplewicke 14y ago
    If you don't mind me asking, I'd be curious to hear what decisions you've made on cash vs accrual accounting, pass-through vs corporate taxation, and the use of guaranteed payments vs distributions. I know a lot depends on the specifics of each situation, but haven't heard a lot of details on this from people running single-member bootstrapped SAAS LLCs before :) .
melvinmt 14y ago
Can you elaborate on why incoming transfers from reputable companies have a certain risk attached? I simply can't think of any reason why that should be the case. Isn't the primary function of the bank to receive and store your money?
- jacques_chester 14y ago
  From the POV of the bank, no. Their primary function is to make money on the carry trade between money borrowed and money lended. Your deposits are borrowed funds. Generally, in the case of fraud, the bank is the one who is on the hook. They must make good on, for example, a chargeback. When your entire business model is built around making 2-3% on large pools of money, it's critical to squash risk. The losses from one fraud event can wipe out the LTV of a small business account.
- jonknee 14y ago
  Money from unknown sources (aka "online services") coming in daily doesn't seem outrageous to be an outlier for fraud. Especially if the account was being used as a float of sorts (a small balance kept).
- lectrick 14y ago
  Google "Sarbanes-Oxley" and weep.
- patio11 14y ago
  It could be as simple as "We do not have sufficient risk controls on that product to feel comfortable with you moving that velocity of money through it. Given that your use of the product is not very valuable for us, we decline to bear an unknown, uncontrolled risk to secure your business."
jlgreco 14y ago
How could that be the sort of thing they only decide after a few years? Does it take them that long to notice that they don't like it?
- patio11 14y ago
  Probably? Someone went to a meeting one day, heard about a new fraud technique, told a junior analyst to run a SQL query and figure out which B2C accounts at this line of business had anomalously high numbers of incoming transfers, and BCC had 20x~50x the mean, so I was identified as one of a few hundred accounts to pare to reduce risk.
  - spinlock 14y ago
    they might have reached the $10k daily cap. Once you start moving more than $10k in a day, the bank has different laws it has to follow which are more strict about where the money is coming from or going to.
- illuminate 14y ago
  Banks and payment processors tend to change their terms of service pretty often in relation to internet services and purchases. Stodgy yes, but very smart and on top of risk-aversion.
mrb 14y ago
"We know you're clean and well-established with us, but this use of the account with two incoming transfers a day is outside of our risk parameters, so you've got 30 days to move off it for your business use. We don't want this business" This is a good example of why we need Bitcoin. The bank tells you that you cannot use your accounts a certain way? Fine. Use Bitcoin and nobody can stop you from receiving as many payments as you want.
- jonknee 14y ago
  Which is good and bad, if banks don't want to take business of people who have questionable transactions it becomes more difficult to run scams. Bitcoin is the wild west, it's always better if you're the one taking the money.
  - muyuu 14y ago
    I think you missed the part about "we know you are clean". Both banks and bitcoin business regulate themselves mostly arbitrarily. On top of whatever rules they have to follow. Then we are basically subject to competition, and banks have a limited amount of that. This places most of the power on their side and against the user.
- shrikant 14y ago
  It was a "retail" account, so they were probably happy to look the other way as long as the volume of "business moneys" flowing through it was below a certain threshold. This would be analogous to a single dev using a [cheap|free] personal license on software for commercial activities, which is de facto OK till you hit a certain size. Then he would be better off purchasing a commercial license.
wcoenen 14y ago
> P.S. If any of you think this won't happen to Mt. Gox ... This has already happened to Mt. Gox multiple times. At one point they took a French bank to court to get their account reopened[1]. Currently they use a Polish bank for SEPA transfers in Europe. Mt. Gox knows that they cannot rely on a single bank account. They are prepared for such events. [1] https://bitcointalk.org/index.php?topic=41317.0 https://bitcointalk.org/index.php?topic=41317.0

by patio11 14y ago

trevorcreech 14y ago

Where do your BCC payments go now?

patio11 14y ago
A business checking account at Bank of America, currently. I should probably have two of them, technically, since I have two LLCs now, but I haven't gotten around to that yet.
- jplewicke 14y ago
  If you don't mind me asking, I'd be curious to hear what decisions you've made on cash vs accrual accounting, pass-through vs corporate taxation, and the use of guaranteed payments vs distributions. I know a lot depends on the specifics of each situation, but haven't heard a lot of details on this from people running single-member bootstrapped SAAS LLCs before :) .

melvinmt 14y ago

Can you elaborate on why incoming transfers from reputable companies have a certain risk attached? I simply can't think of any reason why that should be the case. Isn't the primary function of the bank to receive and store your money?

jacques_chester 14y ago
From the POV of the bank, no. Their primary function is to make money on the carry trade between money borrowed and money lended. Your deposits are borrowed funds. Generally, in the case of fraud, the bank is the one who is on the hook. They must make good on, for example, a chargeback. When your entire business model is built around making 2-3% on large pools of money, it's critical to squash risk. The losses from one fraud event can wipe out the LTV of a small business account.
jonknee 14y ago
Money from unknown sources (aka "online services") coming in daily doesn't seem outrageous to be an outlier for fraud. Especially if the account was being used as a float of sorts (a small balance kept).
lectrick 14y ago
Google "Sarbanes-Oxley" and weep.
patio11 14y ago
It could be as simple as "We do not have sufficient risk controls on that product to feel comfortable with you moving that velocity of money through it. Given that your use of the product is not very valuable for us, we decline to bear an unknown, uncontrolled risk to secure your business."

jlgreco 14y ago

How could that be the sort of thing they only decide after a few years? Does it take them that long to notice that they don't like it?

patio11 14y ago
Probably? Someone went to a meeting one day, heard about a new fraud technique, told a junior analyst to run a SQL query and figure out which B2C accounts at this line of business had anomalously high numbers of incoming transfers, and BCC had 20x~50x the mean, so I was identified as one of a few hundred accounts to pare to reduce risk.
- spinlock 14y ago
  they might have reached the $10k daily cap. Once you start moving more than $10k in a day, the bank has different laws it has to follow which are more strict about where the money is coming from or going to.
illuminate 14y ago
Banks and payment processors tend to change their terms of service pretty often in relation to internet services and purchases. Stodgy yes, but very smart and on top of risk-aversion.

mrb 14y ago

"We know you're clean and well-established with us, but this use of the account with two incoming transfers a day is outside of our risk parameters, so you've got 30 days to move off it for your business use. We don't want this business" This is a good example of why we need Bitcoin. The bank tells you that you cannot use your accounts a certain way? Fine. Use Bitcoin and nobody can stop you from receiving as many payments as you want.

jonknee 14y ago
Which is good and bad, if banks don't want to take business of people who have questionable transactions it becomes more difficult to run scams. Bitcoin is the wild west, it's always better if you're the one taking the money.
- muyuu 14y ago
  I think you missed the part about "we know you are clean". Both banks and bitcoin business regulate themselves mostly arbitrarily. On top of whatever rules they have to follow. Then we are basically subject to competition, and banks have a limited amount of that. This places most of the power on their side and against the user.
shrikant 14y ago
It was a "retail" account, so they were probably happy to look the other way as long as the volume of "business moneys" flowing through it was below a certain threshold. This would be analogous to a single dev using a [cheap|free] personal license on software for commercial activities, which is de facto OK till you hit a certain size. Then he would be better off purchasing a commercial license.

wcoenen 14y ago

> P.S. If any of you think this won't happen to Mt. Gox ... This has already happened to Mt. Gox multiple times. At one point they took a French bank to court to get their account reopened[1]. Currently they use a Polish bank for SEPA transfers in Europe. Mt. Gox knows that they cannot rely on a single bank account. They are prepared for such events. [1] https://bitcointalk.org/index.php?topic=41317.0 https://bitcointalk.org/index.php?topic=41317.0