Document information and change log

Document Information

Change log

Gender And Entity Neutrality

The masculine form is used solely for the sake of better readability. It always refers to persons of any gender identity (m/f/diverse). This document uses the abbreviation “Give” for all legal entities and subsidiaries.

Table of Contents

Definitions for terms and acronyms        5

Purpose        6

Reserves Definition        6

The Reserves Cycle        6

Dynamic Reserve        6

What happens if a merchant is terminated and the funds are never released?        7

Risk Mitigation        7

1. Integrated Customer Information        7

2. Controlled Fund Disbursement        7

3. Risk Level Monitoring        7

4. Sub-merchant Access to Funds        8

5. Sub-merchant Preference for Custodial Account        8

Merchant Transfers        8

Objectives        8

General Criteria        9

Reserve Thresholds        9

Reserve Requirements and Risk Classification        9

Reserve Application        9

Risk Determination        9

Transfer Cancellations and Adjustments        10

Cancellation of Non-Compliant Transfers        10

Negative Balance Coverage        10

Roles and Responsibilities        10

Finance Team        10

Settlement Account Balancing Procedure        11

Objective        11

Responsibilities        11

Procedure        11

Data Collection:        11

Review Settlement Transactions:        11

Reconciliation:        11

Identification of Discrepancies:        11

Resolution of Discrepancies:        12

Documentation:        12

Balancing:        12

Verification and Approval:        12

Reporting:        12

Monitoring:        12

Periodic Review:        12

Documentation Retention:        12

Error Resolution Procedure        13

Daily Reconciliation        13

Processing Errors        13

Error Review and Notification        13

Escalation Procedure        13

Daily Error Handling        13

Conclusion        14

Card Network Reserve Policies        14

Visa        14

Mastercard        15

American Express        15

Discover        16

Merchant Losses and Collections        16

Suspicious Activity        16

Reporting        17

Conclusion        20

Exhibit A: Funds Flows Chart with Reserves        20

Exhibit B: Daily Submerchant Settlement File Template        21

Exhibit C: Submerchant Access to their Settled Funds and Transaction History        22

Appendix A: Transfer and Reserve Procedures        26

A.1 Merchant Transfer Request Review        26

A.2 Reserve Allocation Process        26

A.3 Transfer Execution        26

A.4 Transfer Cancellation        26

A.5 Negative Balance Coverage        26

A.6 Reporting and Oversight        26

Definitions for terms and acronyms

Purpose

As a part of its risk mitigation, Give may require a sub-merchant to provide a reserve and or a personal guarantee. There are several factors that  determine if the reserve is required. The factors include sub-merchant’s risk level, unusual activity that has been determined through investigation not suspicious, and the sub-merchant’s financial state. The reserve will be maintained with the Sponsor.

Reserves Definition

A reserve is funds or an asset(s) set aside for unexpected  financial obligations and liabilities.

The Reserves Cycle

Card brands deposit the funds into the Sponsor's For Benefit Of (“FBO”) account. The Payment Processor then forwards a NACHA file for processing to this account. The NACHA file includes instructions for transferring all sub-merchant funds and collected fees into Give’s custodial account. Following this, the funds are distributed to the sub-merchants via a daily ACH file from the custodial bank. Give retains the collected fees and ensures the FBO account is sufficiently funded to cover these fees. Merchant reserves are held in the FBO account.

Image 1

Dynamic Reserve

The funds held are intended for the settlement payout of each submerchant. The funds belong to the sub-merchants, however the funds are not automatically disbursed to the submerchant. Submerchants have the flexibility to request a payout of their total settlement funds that has been accrued over time or opt for a partial amount of the aggregated funds. This can be done at any time, either through an online interface or by contacting customer support. See Exhibit C: Submerchant Access to their Settled Funds and Transaction History.

Instead of holding a fixed amount of submerchant funds (rolling reserve), we employ a dynamic reserve system in collaboration with the Sponsor. When a submerchant requests a payout, Give assesses the sub merchant’s risk level. If the risk is deemed elevated, the payout is temporarily placed in reserve. This hold continues until a comprehensive risk assessment is completed, after which the funds are released. Funds may be held in reserve for a period consistent with Card Network Reserve Policies. In lieu of creditworthiness or mitigation risk and resolve onboarding exceptions, Give will hold the merchant’s pending transactions longer to avoid chargeback.

What happens if a merchant is terminated and the funds are never released?

Funds are transferred in accordance with the acquirer sponsor's policy and card network rules.

Risk Mitigation 

Risk mitigation is a top priority at Give, and we've implemented multiple controls to address potential risks effectively. Key measures include:

1. Integrated Customer Information

Customer identifying information provided by acquiring banks, payment processors, or payment networks is always kept with the transaction details, ensuring no separation occurs.

2. Controlled Fund Disbursement

Funds are not automatically sent to sub-merchants. Before any release, Give thoroughly reviews each transaction for chargebacks, potential fraud, and compliance with financial crime laws, including the Bank Secrecy Act (“BSA”), Anti-Money Laundering (“AML”) regulations, and the Office of Foreign Assets Control (“OFAC”) requirements.

3. Risk Level Monitoring

Sub-merchants with escalating risk levels during the review period are subject to additional scrutiny and may require a reserve, Give's internal controls for managing payouts to these sub-merchants include utilizing our Application Programming Interface (“API”), which adds an extra layer of security.

4. Sub-merchant Access to Funds

Sub-merchants cannot directly access the custodial account. Instead, they must initiate a request to withdraw funds. Each request is carefully reviewed by Give before the funds are released to ensure compliance and to mitigate risk.

5. Sub-merchant Preference for Custodial Account

Given the transparency and security provided by Give, many sub-merchants prefer to keep their funds in the custodial account for added security and convenience. They have the option to request partial or full payouts as needed.

Through these comprehensive controls and procedures, Give maintains a secure and compliant environment, safeguarding against financial crimes and ensuring the integrity of transactions.

Image 2

Merchant Transfers

Objectives

The criteria and procedures governing merchant money transfers and the allocation of reserve balances. It applies to all merchants who process transactions on the platform and governs when transfers are permitted, how reserves are calculated, and how risk classification affects ongoing reserve requirements. The Finance Team, under the oversight of the CBFO, is responsible for administering and enforcing these procedures.

General Criteria

A merchant may initiate transfers from their available balance after they have processed transactions for at least thirty (30) consecutive days. Eligibility is also dependent on whether the merchant maintains an adequate reserve balance relative to their risk classification and estimated monthly gross sales volume.

Reserve Thresholds

• Merchants classified as low risk may be required to hold as little as zero percent (0%) of their estimated monthly gross sales in reserve.
• Merchants classified as high risk may be required to hold up to twenty percent (20%) of their estimated monthly gross sales in reserve.

The Risk team defines the reserve strategy, and the Finance team ensures the reserve movements are executed accordingly.. Merchants who do not meet reserve requirements must request a transfer through the Finance Team. In such cases, the Finance Team will:^[a]

1. Calculate the appropriate reserve percentage to be held.
2. Move funds from the merchant’s available balance into the reserve balance.
3. Initiate the transfer of the remaining available funds to the merchant.

Reserve Requirements and Risk Classification

Reserve Application

The reserve balance functions as a safeguard against potential losses due to chargebacks, refunds, and other financial obligations. Merchants must maintain a reserve amount proportionate to both the transfer requested and their available balance. Transfers that would deplete reserves below the required threshold will not be processed.

Risk Determination

Risk classification is determined at the time of underwriting approval and may be adjusted on an ongoing basis. Factors influencing merchant risk classification include:

• Merchant Category Code (MCC)
• Processing volume and transaction velocity
• Chargeback and refund frequency
• Use of gift cards or alternative payment methods
• Material changes to the merchant’s website, products, or services
• Any other indicators of elevated financial or reputational risk

Merchants may move between classifications over time depending on changes in their business profile and processing history.

Transfer Cancellations and Adjustments

Cancellation of Non-Compliant Transfers

If a merchant without an adequate reserve initiates a transfer, the transfer will be cancelled. The Finance Team will reallocate the appropriate portion of funds into the reserve balance, and the merchant will then be able to reinitiate a transfer for the remaining available balance.

Negative Balance Coverage

Automatic systems are authorized to move funds from the reserve balance to the available balance in order to cover negative balances resulting from:

• Refunds
• Chargebacks
• Fee assessments or penalties

These automatic reallocations ensure that merchant accounts remain balanced and obligations are satisfied.

Roles and Responsibilities

Finance Team

The Finance Team, operating under the authority of the CBFO, is responsible for:

• Monitoring merchant reserves and processing transfer requests.
• Cancelling transfers that do not meet reserve requirements.
• Moving funds between available and reserve balances.
• Allocating reserves according to merchant risk classification.

Settlement Account Balancing Procedure

Objective

To reconcile and balance settlement accounts for accurate financial reporting and transaction reconciliation within a Payment Facilitator's operations.

Responsibilities

• Settlement Account Manager: The individual or team responsible for overseeing the settlement account reconciliation process.
• Finance Department: The department responsible for financial transactions and records.
• Auditors/Compliance Team: If applicable, individuals or teams responsible for auditing and ensuring compliance with regulatory requirements.

Procedure

• Data Collection:

• Gather all relevant financial data, including transaction records, settlement reports, and bank statements related to the settlement account.

• Review Settlement Transactions:

• Examine all incoming and outgoing settlement transactions posted to the settlement account.
• Verify that each transaction is accurately recorded, including the date, amount, and description.

• Reconciliation:

• Reconcile the settlement account by comparing the recorded settlement transactions with external records provided by acquiring banks, payment processors, or payment networks.
• Identify and investigate any discrepancies or variances between the recorded transactions and external records.

• Identification of Discrepancies:

• For discrepancies found during the reconciliation process, determine the source and nature of the issue.
• Categorize discrepancies as errors, adjustments, or outstanding items that require resolution.

• Resolution of Discrepancies:

• Take appropriate actions to resolve identified discrepancies. This may include contacting acquiring banks, payment processors, or other relevant parties to correct errors or make necessary adjustments.
• Document the resolution process, including communication and follow-up.

• Documentation:

• Maintain detailed records of all reconciliation activities, including transaction records, reconciliation reports, and resolution documentation.
• Ensure that records are organized and easily accessible for auditing and compliance purposes.

• Balancing:

• Calculate the closing balance of the settlement account after all discrepancies have been resolved.
• Ensure that the closing balance matches the expected or target balance.
• Document out of balance on the settlement spreadsheet and the explanation.

• Verification and Approval:

• Have the reconciliation and balancing process verified and approved by a designated authority within the organization.
• Since verification is automated, a secondary review may be conducted on a sampling by a different team or individual to enhance accuracy and reliability.

• Reporting:

• Generate reconciliation reports, including details of reconciled settlement transactions, discrepancies, and resolution actions taken.
• Submit reports to relevant stakeholders, including Sponsor, auditors or compliance teams, if applicable.

• Monitoring:

• Continuously monitor the settlement account for any new or recurring discrepancies.
• Implement preventive measures to minimize future discrepancies.

• Periodic Review:

• Conduct periodic reviews of the settlement account balancing procedure to identify opportunities for process improvement and efficiency.

• Documentation Retention:

• Maintain records of the settlement account reconciliation process for the required retention period, as dictated by regulatory requirements.

Error Resolution Procedure

Daily Reconciliation

The reconciliation process ensures that all settled transactions are accurately matched with the corresponding bank account details.

• Daily reconciliation occurs between settled transactions in the bank and the internal records.
• A daily set of files is generated for review and can be accessed by the relevant personnel (Sponsor, Payment Processor, Compliance and Finance Team) to verify any discrepancies with the bank account.
• These files are generated at midnight and processed in batches.
• Any anomalies or discrepancies are reviewed and investigated by the Compliance Manager in collaboration with the Sponsor. The Payment Processor provides front-end rejects, while the Finance Team holds overall responsibility for the investigation.

Processing Errors

Processing errors are automatically detected by the system and placed in an "Error" state. These errors are categorized and handled as follows:

• Front-End Reject or Card Network Reject: a notification is sent by the Payment Processor with details about the processing error.
• Automatic fixes: some errors are automatically fixed and reconciled by the system.

Error Review and Notification

Errors are reviewed by examining the offload data, which includes all the transaction details.

If the error is easily rectifiable, the team will correct it.

Escalation Procedure

If the error cannot be easily resolved, the team contacts the relevant parties via Jira Service Desk to resolve the issue.

Daily Error Handling

Processing errors are handled daily:

• Notifications are reviewed daily to identify any issues.
• The team^[b] examines the transaction offload data to pinpoint the exact cause of the error.
• Actions are taken based on the severity of the error, with escalation occurring if necessary.

Conclusion

The Settlement Account Balancing Procedure for a Payment Facilitator is essential for ensuring the accurate reconciliation of settlement transactions, financial transparency, and compliance with industry regulations. To demonstrate Give’s commitment to transparency and compliance, the settlement process includes the following:

• Customer Due Diligence at onboarding to understand the customer’s nature of business.
• Consistent transaction monitoring ensures that the transactions that are flowing through the Settlement Account align with the customer’s nature of business.
• Customer identifying information is retained with the transactions.
• Bank statements are used during the reconciliation process.
• Discrepancies are timely addressed.
• Customers are not allowed to directly transact in the Settlement Account.
• Independent review of the verification process.
• Reporting to the Second Line of Defense.
• Consistent monitoring of the Settlement Account.

By following this procedure diligently, Give the Payment Facilitator can minimize financial discrepancies, reduce operational risks, and maintain a strong financial foundation while providing reliable payment processing services to its clients. Regular reconciliation and balancing contribute to operational excellence and regulatory compliance.

Card Network Reserve Policies

Visa

Reserve Requirements: Visa typically requires payment facilitators to maintain a reserve account as a risk management tool. The size and duration of the reserve can depend on the facilitator's processing volume, chargeback rates, and financial stability. Give’s reserves policy aligns to Visa’s  policy, the acquirer must hold and manage the reserves. The merchant’s funds are in a FBO account with the Sponsor. The Sponsor has control over the funds. The amount of funds belonging to each merchant is easily identifiable. Merchants do not have direct access to funds and will have to request the funds be transferred to them. Reconciliation occurs daily. Give processes merchant transactions timely. Even though Give holds the merchant’s pending transactions longer to avoid chargeback, the processing time frame is still within the networks’ guidelines. Give’s Risk Department regularly reviews merchant transaction data, chargeback rates, and any changes in the merchant's business operations, including change in account.

Settlement: Visa allows payment facilitators to settle funds directly with sub merchants, and policies regarding holding these funds would detail how and when these settlements should occur to ensure compliance and protect against financial risk.

Mastercard

Risk Management: Like Visa, Mastercard emphasizes the importance of risk management for payment facilitators, including the possible need for a reserve to cover chargebacks, fines, and other financial obligations. A Sponsored Merchant Agreement may provide for a Payment Facilitator to withhold amounts for chargeback reserves or similar purposes. The merchant’s funds are in a FBO account with the Sponsor. The Sponsor has control over the funds. The amount of funds belonging to each merchant is easily identifiable. Merchants do not have direct access to funds and will have to request the funds be transferred to them. Reconciliation occurs daily. Give processes merchant transactions timely. Even though Give holds the merchant’s pending transactions longer to avoid chargeback, the processing time frame is still within the networks’ guidelines. Give’s Risk Department regularly reviews merchant transaction data, chargeback rates, and any changes in the merchant's business operations, including change to the account.

Submerchant Funding: Mastercard's rules outline procedures for the funding of submerchants, including timelines for settlement and conditions under which funds can be held or delayed.

American Express

Funding and Reserves: American Express may have specific guidelines for how payment facilitators handle submerchant funds, emphasizing timely and accurate settlements. The need for reserves, and how they're managed, would be part of these guidelines, often tailored to the risk profile of the payment facilitator and its sub merchants.

Compliance: Ensuring that payment facilitators and their sub merchants comply with American Express rules is crucial, including how funds are handled, reported, and protected. Merchants are required to obtain and maintain all required licenses and approvals necessary to conduct business, including Stored Value Transaction requirements to hold funds in reserve. The merchant’s funds are in a FBO account with the Sponsor. The Sponsor has control over the funds. The amount of funds belonging to each merchant is easily identifiable. Merchants do not have direct access to funds and will have to request the funds be transferred to them. Reconciliation occurs daily. Give processes merchant transactions timely. Even though Give holds the merchant’s pending transactions longer to avoid chargeback, the processing time frame is still within the networks’ guidelines. Give’s Risk Department regularly reviews merchant transaction data, chargeback rates, and any changes in the merchant's business operations, including change to the account.

Discover

Settlement Policies: Discover requires payment facilitators to adhere to specific settlement practices, which would include the management of submerchant funds and any associated reserves. The merchant’s funds are in a FBO account with the Sponsor. The Sponsor has control over the funds. The amount of funds belonging to each merchant is easily identifiable. Merchants do not have direct access to funds and will have to request the funds be transferred to them. Reconciliation occurs daily. Give processes merchant transactions timely. Even though Give holds the merchant’s pending transactions longer to avoid chargeback, the processing time frame is still within the networks’ guidelines. Give’s Risk Department regularly reviews merchant transaction data, chargeback rates, and any changes in the merchant's business operations, including change to the account.

Financial Stability: Part of Discover's policies may include requirements for maintaining financial reserves to manage risks associated with submerchant activities, including chargebacks and disputes.

Merchant Losses and Collections

Give calculates and tracks the Trailing Twelve Month (“TTM”) Credit and Fraud Loss by summing up the total losses that were incurred over the past twelve months. The TTM includes several loss types, chargebacks, fraud incidents, and credit defaults. The TTM report is generated weekly.  When the TTM losses exceed predefined thresholds, it will be escalated to senior management and the board of directors. A documentation of the TTM credit and fraud loss monitoring activities,  actions taken and their results will be stored in a centralized repository.

Suspicious Activity

If the merchant’s activity appears criminal including fraud and other financial crimes, the merchant’s funds will be held longer and eventually not returned to the merchant.

Reporting

A daily settlement report detailing each sub merchant's cleared purchases and payout amounts will be sent to the Acquirer sponsor. Please see the Daily Submerchant Settlement File Template in Exhibit B.  Additionally, a history of these daily reports is accessible at any time.^[c]

Conclusion

In conclusion, Give's approach to managing reserves and ensuring rigorous risk mitigation represents a robust framework designed to protect the interests of sub-merchants while adhering to the highest standards of regulatory compliance and security. By integrating dynamic reserve systems and implementing stringent controls over fund disbursement, Give not only prioritizes the safety and flexibility of sub-merchant funds but also fosters a transparent and secure transaction environment. The careful balance of allowing sub-merchant autonomy in fund access with a proactive stance on risk assessment underscores Give's commitment to operational excellence and trust. As we continue to refine our processes and leverage advanced technologies, our focus remains on delivering a seamless, secure, and user-centric experience for all stakeholders involved. Through dedication to these principles, Give is poised to navigate the complexities of financial transactions while championing the success and security of our sub-merchant partners.

Exhibit A: Funds Flows Chart with Reserves

Exhibit B: Daily Submerchant Settlement File Template

Exhibit C: Submerchant Access to their Settled Funds and Transaction History

Screenshot 1C: Submerchant can always see their available balance of settled funds. They can initiate a payout by clicking “Send Money” anytime they want to move the funds to their DDA account.^[d]

Screenshot 2C:  Submerchant can send money to any approved bank account.

Screenshot 3C: Submerchant can send money 24/7 up to the amount of their available balance which is the total aggregate lifetime of settled funds minus total payouts.

Screenshot 4C: Submerchant can view details of the transfer and all past transfers.

Appendix A: Transfer and Reserve Procedures

A.1 Merchant Transfer Request Review

1. Confirm the merchant has processed for at least thirty (30) consecutive days.
2. Review current reserve percentage required for the merchant’s risk classification.
3. Verify that sufficient funds exist in the available balance to satisfy both the requested transfer and the required reserve threshold.

A.2 Reserve Allocation Process

1. If reserves are insufficient, calculate the shortfall.
2. Move the required funds from the available balance into the reserve balance.
3. Document the adjustment in the financial system of record.

A.3 Transfer Execution

1. Initiate transfer for the requested amount, minus reserve allocation.
2. Confirm transfer details with the banking partner or payment processor.
3. Record transfer confirmation in the merchant account ledger.

A.4 Transfer Cancellation

1. If the requested transfer cannot be completed due to insufficient reserve coverage, cancel the transfer.
2. Notify the merchant of the cancellation and the reason.
3. Reallocate funds into the reserve balance before allowing any subsequent transfer attempt.

A.5 Negative Balance Coverage

1. Monitor merchant accounts for negative balances caused by refunds, chargebacks, or fees.
2. Authorize automatic system triggers to release funds from the reserve balance to the available balance to cover deficits.
3. Document each reallocation for audit and reporting purposes.

A.6 Reporting and Oversight

1. Provide monthly reports on merchant reserves, transfers, and cancellations to the CBFO.
2. Escalate anomalies or patterns of elevated risk to the Risk Team (risk@givecorporation.com) for further review.

The information contained herein is intended to provide a general overview of the Company’s policies and procedures relating to compliance with this Policy and does not constitute legal advice or a complete description of the laws and regulations relating to this Policy. The Company has made every effort to ensure the accuracy and completeness of this Policy.  This document is intended to provide guidance to employees of Company on how to comply with applicable laws and regulations related to this Policy. Employees should consult with the Legal or Compliance Department if they have any questions about the Policy or how to comply with it. Company reserves the right to modify or update this Policy at any time without notice. Employees are responsible for reviewing the Policy on a regular basis to ensure that they are aware of any changes. This Policy applies to all employees of Company, regardless of their position or location unless stated otherwise in the Policy. Employees are responsible for complying with the Policy and for reporting any suspected violations to their respective supervisor, the Legal Department, AMLCO or respective recipient of such violation as outlined in this Policy.