What checks do most payment service providers conduct prior to processing a payment?

Sanctions checks are critical for payment service providers as they ensure compliance with legal and regulatory requirements. These checks involve verifying whether a transaction is being conducted with individuals, organizations, or countries that are on sanctioned lists compiled by governments and international bodies. Such lists may include entities involved in illegal activities, terrorism, or other high-risk behavior that could pose potential legal liabilities for the payment service provider.

Conducting sanctions checks helps to mitigate the risk of facilitating transactions that could result in severe penalties or reputational damage. It's a critical step in the due diligence process aimed at preventing the payment system from being used for money laundering or other illicit activities, thus maintaining the integrity of the financial system.

Fraud checks, while also an important part of the payment processing ecosystem, focus more on identifying and preventing unauthorized transactions rather than ensuring compliance with legal sanctions. Similarly, regulatory checks pertain to adherence to broader regulations that govern financial transactions but can vary based on jurisdiction and the specific financial regulations in place. Debit checks are not typically a standard procedure for preventing illegal activities or regulatory infractions in the context of payment processing.