Discover 2015 Annual Report Download - page 39

-23-
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 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 Dodd-Frank Act contains several provisions that are relevant to the business practices, network transaction
volume, revenue and prospects for future growth of PULSE, our debit card network business. The Dodd-Frank 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 Dodd-Frank 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 related impacts on our debit card business, see “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 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. Our
program is typically reviewed on an annual basis by federal banking regulators. In May 2015 Discover Financial
Services entered into a written agreement with the Federal Reserve Bank of Chicago to resolve matters related to the
Federal Reserve’s examination of Discover Financial Services’ anti-money laundering and related compliance
programs. Discover Financial Services agreed to, among other things, enhance its anti-money laundering and related
compliance programs. This agreement follows the Consent Order that Discover Bank entered into in June 2014 with the
FDIC to resolve matters related to the FDIC’s examination of Discover Bank’s anti-money laundering and related
compliance programs. In the Consent Order, Discover Bank agreed to, among other things, enhance its anti-money
laundering and related compliance programs. See Note 20: Litigation and Regulatory Matters to our consolidated
financial statements for more information. For additional information regarding bank regulatory limitations on
acquisitions and investments, see "— Acquisitions and Investments."
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.