MasterCard 2015 Annual Report Download - page 24

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Regulation Related to Our Participation in the Payments Industry
Regulations affecting the global payments industry may materially and adversely affect our overall business and results of
operations.
We are subject to regulations that affect the payments industry in the many jurisdictions in which our cards and other devices
are used. In particular, many of our customers are subject to regulations applicable to banks and other financial institutions,
and, consequently, we are at times affected by such regulations. Regulation of the payments industry, including regulations
applicable to us and our customers, has increased significantly in the last several years. See “Business-Government Regulation”
in Part I, Item 1 for a detailed description of such regulation and related legislation. Examples include:
• Anti-Money Laundering and Economic Sanctions - We are subject to AML laws and regulations, including the USA Patriot
Act in the United States, as well as the various economic sanctions programs administered by OFAC, including restrictions
on financial transactions with certain countries and with persons and entities included on OFAC sanctions lists (including
the SDN List). We have policies, procedures and controls designed to comply with applicable AML and OFAC sanctions
requirements. We take measures to prevent transactions that do not comply with OFAC sanctions, including obligating
our customers to screen cardholders and merchants against OFAC sanctions lists. However, despite these measures, it
is possible that such transactions may be processed through our payments system. Activity such as money laundering
or terrorist financing involving our cards could result in an enforcement action, and our reputation may suffer due to
our customer’s association with those countries, persons or entities or the existence of any such transaction. Any
enforcement action or reputational damage could reduce the use and acceptance of our products and/or increase our
costs, and thereby have a material adverse impact on our business. In addition, geopolitical events and resulting OFAC
sanctions could lead jurisdictions affected by those sanctions to take actions in response that could adversely affect our
business. For example, in response to the global sanctions imposed as a result of the Ukraine conflict, the Russian
government amended its National Payments Systems laws requiring all payment systems to process domestic
transactions through a government-owned payment switch. There is a risk that in the future other jurisdictions (or their
sympathizers) may take similar or other actions in response to sanctions that could negatively impact us.
• Consumer Financial Protection Bureau (“CFPB”) - In the United States, the CFPB could regulate consumer financial
products, including amending existing requirements or imposing new ones. The CFPB also has supervisory and
independent examination authority as well as enforcement authority over certain financial institutions, their service
providers, and other entities, which could include us due to our processing of credit, debit and prepaid transactions. It
is not clear whether and/or to what extent the CFPB will regulate broader aspects of payment card networks.
• Increased Central Bank Oversight - Several central banks or similar regulatory bodies around the world that have
increased, or are seeking to increase, their formal oversight of the electronic payments industry are in some cases
considering designating them as “systemically important payment systems” or “critical infrastructure.” If MasterCard
were designated “systemically important” in a particular jurisdiction, it would be subject to new regulations relating to
its payment, clearing and settlement activities, which could address areas such as risk management policies and
procedures; collateral requirements; participant default policies and procedures; the ability to complete timely clearing
and settlement of financial transactions; and capital and financial resource requirements. Also, MasterCard could be
required to obtain prior approval for changes to its system rules, procedures or operations that could materially affect
the level of risk presented by that payments system.
• Issuer Practice Legislation and Regulation - Our financial institution customers are subject to numerous regulations,
which impact us as a consequence. Existing or new regulations in these or other areas may diminish the attractiveness
of our products to our customers.
• Regulation of Internet and Digital Transactions - Proposed legislation in various jurisdictions relating to Internet
gambling and other digital areas such as cyber-security, copyright, trademark infringement and privacy could impose
additional compliance burdens on us and/or our customers, including requiring us or our customers to monitor, filter,
restrict, or otherwise oversee various categories of payment card transactions.
Increased regulatory focus on us, such as in connection with the matters discussed above, may result in costly compliance burdens
and/or may otherwise increase our costs. Similarly, increased regulatory focus on our customers may cause such customers to
reduce the volume of transactions processed through our systems. Finally, failure to comply with the laws and regulations
discussed above to which we are subject could result in fines, sanctions or other penalties. Each may individually or collectively
materially and adversely affect our financial performance and/or our overall business and results of operations, as well as have
an impact on our reputation.