By Oleksandr Honcharov, CEO at FlawlessMLM
The FTC settled with payment processor Nuvei for $4.85 million on September 4, over charges it served merchants engaged in fraud. Nuvei's U.S. subsidiary served merchants making false earnings claims and merchants impersonating government agencies, according to the FTC complaint. For MLM platforms that route commissions through their own payment gateways, the case sets a new bar for merchant screening.
What Happened
The Federal Trade Commission announced the $4.85 million Nuvei settlement on September 4, a day after filing its complaint in Arizona federal court. The FTC alleges Nuvei processed more than $30 million in consumer payments for Reimage, an offshore tech support scam, between 2017 and 2023. "Consumers deserve a payment system that is competitive, transparent and fortified against fraud," said Christopher Mufarrige, Director of the FTC's Bureau of Consumer Protection.
Nuvei's U.S. subsidiary also opened accounts for merchants with false earnings claims, including DK Automation, and merchants impersonating tax authorities, including American Tax Service. Some of these merchants had already been terminated by other processors for excessive chargebacks or fraud. The FTC charged Nuvei with unfair practices and with facilitating deceptive telemarketers under the Telemarketing Sales Rule.
The order requires Nuvei to screen and monitor its clients, with enhanced review for high-risk categories and high chargeback rates. It also bans Nuvei from serving tech-support telemarketers and from using tactics to dodge bank and card-network fraud monitoring. The $4.85 million payment goes toward consumer redress.
Why Merchant Screening and KYC Compliance Now Matter for the MLM Industry
Nuvei is not an isolated case. The FTC fined Reimage's operators $26 million in 2024, then fined Nuvei $4.85 million this year for failing to screen those merchants.
The FTC has now settled three separate cases tied to payment processors and the Reimage tech-support scheme since 2024, totaling more than $35 million in penalties and consumer redress. — FTC Press Releases, 2024-2026
DK Automation, one of the merchants named in the Nuvei complaint, was accused under the same legal theory the FTC uses against MLM companies. That theory is false or baseless earnings claims made to recruit participants. A payment processor that fails to catch that pattern is now exposed to the same liability as the company making the claims.
That changes where compliance responsibility sits for MLM platforms. KYC compliance and AML compliance are no longer just about verifying who a distributor is. They now extend to verifying what a distributor is being paid to say, and whether the payment rail underneath is watching for it.
What This Means for MLM Platforms — FlawlessMLM's Take
A payment gateway that only processes transactions is a liability waiting for an FTC complaint. The Nuvei order requires exactly the kind of merchant screening and chargeback monitoring a compliance-first platform should already have. That has to be built in, not bolted on after a regulator asks.
Clients often ask whether KYC compliance software is something they need before launch or something they can add later. After Nuvei, the honest answer is before. A payment integration without merchant-level screening is the exact gap the FTC just spent $4.85 million making an example of.
Across 400+ projects, we build KYC identity verification and payment fraud detection into the payment layer itself, not bolted onto checkout afterward. Every gateway integration, fiat or crypto, sits behind the same merchant risk screening before a payout clears.
NL Star Korea, the platform we built for NL International, runs every order through a resident-verification check via Nice before it processes. Every purchase also carries an automatic insurance number from Kossa, the Korean state association for MLM projects, before the sale counts. That is what merchant-level screening looks like when a platform builds it in, instead of a processor discovering the gap after a regulator complains.
A chargeback prevention layer and an audit trail for every merchant decision cost far less to build now than to explain to a regulator later. What MLM companies should check first is a shorter list than most expect.
What MLM Companies Should Do to Strengthen Payment Compliance Now
- Audit your payment gateway's merchant screening. Confirm your platform, or your processor, checks new merchants against chargeback history and fraud databases before onboarding, not after a dispute.
- Separate KYC from onboarding paperwork. Identity verification should run as an automated compliance software layer, not a manual checklist a support team fills out once.
- Monitor chargeback rates continuously. Set internal thresholds below what regulators consider high-risk, and flag any merchant account that crosses them.
- Document how earnings claims are verified. If a distributor makes an income claim, the platform should be able to show what data backs it up.
- Review your payment processor's compliance history. A processor already flagged for weak screening carries that risk into your platform too.
A weak payment gateway is not just a technical risk anymore, it is a regulatory one. Our MLM consulting team runs compliance audits that check exactly the gaps the FTC named in the Nuvei order. Discuss your project with us before a regulator finds the gap for you.
KYC compliance software verifies the identity of distributors and merchants before a platform processes their payments or payouts. MLM platforms need it because payment processors, not just MLM companies, are now held responsible for merchants that skip this step.
AML compliance software flags unusual payment patterns, such as high chargeback rates or transactions tied to previously banned merchants, before they become a liability. The FTC's Nuvei settlement specifically required this kind of ongoing monitoring, not a one-time check at signup.
Merchant fraud prevention means screening and monitoring the businesses a payment processor serves, not just individual transactions. The FTC fined Nuvei because it opened accounts for merchants already known for fraud, false earnings claims, and government impersonation.
Chargeback prevention software matters because the FTC's Nuvei order specifically requires enhanced screening once a merchant's chargeback rate crosses a set threshold. MLM platforms that track chargebacks in real time catch problem distributors before regulators do.