Ask HN: Stripe holding funds for 120 days for no reason

Sounds exactly like PayPal. Is there a law of nature that forces payment processors to act like this?

The business of payment processing is actually the business of managing fraud, and everybody tries to lower costs as they grow and age.

Unless there’s specific external regulation, there’s a regression towards being awful.

That depends, are short term loan interest rates a law of nature?

I wonder if providers like this could offer an option to pay some chunk of money that would cover the cost of a thorough background check and human review of all aspects of your business. They would then be able to trust you enough to not freeze anything without future human intervention.

Not a law of nature, but there are laws of man against “Tipping-off” [1].

Add in the fact there are people trying very hard all the time to defraud the payment processor.

So now you can directly measure false negatives in fraud detection, but your false positive rate is harder to figure out. And whatever mechanism you use to recover from false positives can be abused by true fraudsters.

So it becomes a hard problem - but it is a problem which customers of the payment processor are paying them to solve. So it’s definitely reasonable to expect better.

1: I think a reasonable-ish definition of tipping off: https://onlinelibrary.wiley.com/doi/10.1002/9780470685280.ch...

I would guess AML, not fraud.

Payment processing is an unbelievably competitive business. I've done some work there and wow the owners... I can't speak to the whole world but what I saw of it. The intent is to start off scummy on purpose and hope to make a business of it later if you get traction is how I would describe it.

You're suggesting this likely happens because the payment processor has reported their suspicions to a regulator who isn't getting back to them in a timely manner, and so they can't release the funds until they do? I'm a bit confused because it seems to me that the tip off is when they won't disburse your funds.

ETA: Maybe it's more that they can't give you any information because they can't allow adversaries to differentiate between glitches, random screenings, and investigations?

I think they're saying there's an inherent ponzenomics to payment processing, wherein the might use AML as an excuse to paper over a lack of liquidity by stalling withdrawals. Lots of cryptoasset exchanges will freeze withdrawals over fictitious security or AML concerns when they're going under, for instance.

AML regulations are real, though. Crypto exchanges' fictitious claims wouldn't fool anybody if it wasn't already "a thing" in the more-regulated side of the world.

PayPal is far worse.

If a payment processor suspects a business is laundering money, they can hold the funds, but it's illegal for the payment processor to tell the business that they suspect money laundering. So they end up saying something like "we're holding your funds for vague unspecified reasons".

(Disclaimer: Used to work at Stripe, but not on this particular area. Not an expert on either the law or Stripe's policies.)

Heh, maybe a regulation saying you couldn’t hold money hostage like this if the business is SOC 2 compliant

I haven't seen real example of this in real money financial institutions. Haven't followed crypto exchanges though.

I'll add that I'm also not aware of something like this happening outside of crypto exchanges & don't actually hold an opinion on this hypothesis, as I'm not familiar enough with payment processors to know one way or the other. My comment makes me sound like I support this hypothesis, but that's a mistake in my wording.