Discover 2011 Annual Report Download - page 30

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Payment Networks
We operate the Discover and PULSE networks, which deliver switching and settlement services to financial institutions
and other program participants for a variety of ATM, POS and other electronic banking transactions. These operations are
regulated by certain federal and state banking, privacy and data security laws. Moreover, the Discover and PULSE networks are
subject to examination under the oversight of the Federal Financial Institutions Examination Council, an interagency body
composed of the federal bank and thrift regulators, and the National Credit Union Association. In addition, as our payments
business has expanded globally through Diners Club, we are subject to government regulation in countries in which our
networks operate or our cards are used, either directly or indirectly through regulation affecting Diners Club network licensees.
Changes in existing federal, state or international regulation could increase the cost or risk of providing network services,
change the competitive environment, or otherwise materially adversely affect our operations. The legal environment regarding
privacy and data security is particularly dynamic, and any unpermitted disclosure of confidential customer information could
have a material adverse impact on our business, including loss of consumer confidence.
The Reform Act contains several provisions that may affect the business practices, network transaction volume, revenue,
and prospects for future growth of PULSE, our debit card business. The Reform Act requires that merchants control the routing
of debit transactions, and that interchange fees received by certain payment card issuers on debit card transactions be
“reasonable and proportional” to the issuer's cost in connection with such transactions, as determined by the Federal Reserve.
The Reform Act also requires the Federal Reserve to restrict debit card networks and issuers from requiring debit card
transactions to be processed solely on a single payment network or two or more affiliated networks, or from requiring that
transactions be routed over certain networks. For information regarding implementation of these provisions and potential
impacts on our debit card business, see “Risk Factors - Legislative and regulatory reforms related to the debit card market may
have a significant impact on our PULSE network business and may result in decreases in our PULSE network volume and
revenue” and “Management's Discussion and Analysis of Financial Condition and Results of Operations - Regulatory
Environment and Developments - Payment Networks.”
Money Laundering & Terrorist Financing Prevention Program
We maintain an enterprise-wide program designed to comply fully with all applicable anti-money laundering and anti-
terrorism laws and regulations, including the Bank Secrecy Act and the USA PATRIOT Act of 2001. This program includes
policies, procedures, training and other internal controls designed to mitigate the risk of money laundering or terrorist financing
posed by our products, services, customers and geographic locale. These controls include procedures and processes to detect
and report suspicious transactions, perform customer due diligence, and meet all recordkeeping and reporting requirements
related to particular transactions involving currency or monetary instruments. The program is coordinated by a compliance
officer and undergoes an annual, independent audit to assess its effectiveness.
Sanctions Programs
We have a program designed to comply with applicable economic and trade sanctions programs, including those
administered and enforced by the U.S. Department of the Treasury's Office of Foreign Assets Control. These sanctions are
usually targeted against foreign countries, terrorists, international narcotics traffickers and those believed to be involved in the
proliferation of weapons of mass destruction. These regulations generally require either the blocking of accounts or other
property of specified entities or individuals, but they may also require the rejection of certain transactions involving specified
entities or individuals. We maintain policies, procedures and other internal controls designed to comply with these sanctions
programs.
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