Cyberlockers are file sharing sites that allow consumers to upload files to share with others. They continue to increase in popularity, but with them come an added risk for acquiring banks. While many cloud storage services legally store content for users, cyberlockers – also known as file lockers – incentivize users to upload popular files for others to download. Due to the largely unregulated nature of cyberlockers, these files may include illegal content such as child pornography, bestiality, rape violence videos, pirated software, movies, and music due to their popularity and demand. Authorities have begun to crack down on this illegal file sharing, as seen by a recent string of legal actions against file lockers, leading to the closure of file sharing websites and increased regulatory scrutiny for cyberlockers and their acquirers.
This week, we sat down with Robert H. Caldwell, Founding Partner of G2 Web Services, to interview him on cyberlockers and marketplace merchants, and the risk they present to the payment system. Read on for Bob’s insights into where cyberlockers and marketplace merchants fit in the payment system, the risks associated with them, and best practices for payment providers to mitigate risk associated with these entities.
As an acquirer, knowing what your merchants are selling is key to minimizing your risk for potential violations, especially since merchants can add products to their websites at any given moment, without your knowledge. New products are constantly put on the market, and unfortunately, illegal and risky products are often hard to detect and monitor. Without being aware of these products, you run the risk of brand damage and potential violations, including regulatory fines and even legal penalties. While the list of goods and services that violate MasterCard’s BRAM program and Visa’s Global Brand Protection program (not to mention the law) is exhaustive, G2 Web Services has compiled a list of five lesser-known products that we have identified on merchant websites that you should be on the lookout for.
Cyberlockers are third party file-sharing – also known as “file hosting” – services. Examples of popular cyberlockers are DropBox, Hotfile, MegaVideo, and RapidShare. While there are practical applications for this type of service – such as transferring documents and photos between friends, or collaborating with remote colleagues – these file sharing merchants can also pose immense risk to acquirers. Cyberlockers have been repeatedly found to be associated with brand damaging, risky, or even illegal content, including violent video and intellectual property rights infringement. This business model is currently largely unregulated and very difficult to monitor, so acquirers should proceed with caution.