With the growing technology, it is easy for anyone to buy online. This also assists digital retailers to set up stores on the marketplace and sell their products. But this also inconveniences the global economy because of promptly increasing online fraud in the marketplace. The federal Trade Commission (FTC) obliged the INFORM Consumer Act to prevent financial crimes and provide a secure online shopping platform.
This article guides on INFORM Act requirements and best practices to follow these regulations to prevent non-compliance penalties.
Inform Act – Overview
The Inform Act verifies the third-party seller on the marketplace and gathers documents of their owners. The main aim of the Inform Consumers Act is to protect consumers from fake goods and product reselling scams. Furthermore, the inform act was created to defend online retailers from scammers who sell stolen products online. This also ensures the identity of the actual founder of the retail shop so money launderers can not use the marketplace to create fake invoices.
Inform Consumers Act Requirements
There are various regulations, including AML compliance, during the business verification. The Inform Act was implemented in the marketplace to control fraud in the online retail business. To comply with the Inform Act, companies must follow the given requirements:
- The marketplace should have verified the identity of the third-party customer with over 200 transactions and a $5000 annual avenue. For the verification, they can submit a government ID, business registration number, financial statement, owner name, or address. Uncover the identity requirements for all third-party sellers individuals.
- If a vendor has a $20,000 sale at the start of the year, their contact number, address, or company information must be shown on the product listing page. This information can also be shown on the buyer’s cart history to monitor the activities of the product owners.
- All the documents submitted by the vendor for identity verification must be re-checked annually to indicate any counterfeit in the document or company ownership structure.
- For the purpose of the complaint, the marketplace must give the merchant 10 days for response time; after that, they ban the vendor from their platform.
How to comply with the INFORM Act?
Online retailers must comply with these regulations. Otherwise, law enforcement agencies must pay a penalty of above $50,000 and damage the company’s reputation. For an adequate compliance process, the marketplace can follow the given steps:
Data Collection
Gather the essential required documents to verify the vendors’ identity, including address, contact info, bank account number, business license, financial statement, tax identification papers, etc. These are mainly used in vendor verification, but the required documents depend on the marketplace or the country where the vendor wants to start a business.
Vendor’s Verification
The marketplace must verify the customer’s identity by verifying the vendors’ submitted documents. For verification, they can attest the papers by checking the security features such as fonts, signatures, borders or others depending on the reports. Furthermore, they have to clarify the paper’s data is not counterfeit and invalid by cross-checking it against the original records database.
AML Screening
The watchlist screening is essential for the vendors to ensure they are not involved in illicit activities. It can be done by cross-checking the verified vendor data from the various government and third-party sanction lists. These sanction lists are Politically Exposed Persons (PEPs), Special Interest Entities (SIEs), AML or FATF databases. It ensures the vendor owners are not involved in these illicit activities. Cross-check vendors’ information from the adverse media for a more secure onboarding marketplace.
Automate Compliance Process
To comply with the Inform Consumers Act, the marketplace can use advanced technology to verify vendors’ identity and report the information adequately. There are various tools that the marketplace can use to collect the data and verify the identity. These work on machine learning and AI technology to provide error-free results for merchants. It ensures the company onboards legitimate persons and complies with national and international laws. This also supports the marketplace in verifying the real owners of the companies and uncovering the complex ownership structure. Online retailers can use these centralized reports to show law enforcement agencies and regulatory bodies that they follow all Know Your Business checks.
The Bottom line
Overall, business verification through complying with the US Inform Consumers Act is compulsory for a marketplace. Following Inform Act requirements ensure the vendors are not involved in illicit activities and are legitimate to onboard. Furthermore, the Inform Act increases the marketplace reputation and brand loyalty. This ensures the customers that the platform they purchase from has no fake or counterfeit products. They only deal in the original product because they comply with government policies.
