Adult content websites are often considered high-risk entities for the payments industry due to several inherent characteristics and the complex legal and ethical landscape in which they operate.
It is essential for payment processors considering merchants in the adult content industry to carefully assess all these risks, implement robust compliance measures, and continually monitor the regulatory environment to ensure they can operate responsibly in this sector.
Here are six types of risks you should be aware of when working with merchants in the adult content industry:
In the U.S., obscenity laws regulate adult content exist at both the federal and state level, although new state laws are constantly evolving and often challenged by First Amendment proponents. In June of 2023, Virginia became the latest in a long list of states requiring age verification for online adult websites. These laws are aimed at protecting children from exposure to sexually-explicit material.
In addition to laws, card brands also have standards concerning adult content that apply to payment providers and platforms in their networks. In 2021, for instance, Mastercard enhanced its standards requiring financial institutions connecting merchants to its card network “to certify that the seller of adult content has effective controls in place to monitor, block and, where necessary, take down all illegal content.”
In June 2023, the Federal Bureau of Investigation (FBI) issued a warning about “deepfake” scams involving adult content. In these scams, malicious actors use photos or videos taken from a victim’s social media account or elsewhere on the internet and then use AI technology to convert the photos into sexually-explicit content which they circulate on the internet on social media, public forums, or adult websites.
The victims, who are unaware that their photos have been used, are then contacted by the bad actors, who try to harass the victims or coerce them into paying them or providing them with real sexual imagery of themselves (sextortion) by threatening to send the fake content to family and friends or publishing it on the open internet.
In an article published last month, the FBI called attention to the especial risks that sextortion poses for minors, stating, “From October 2021 to March 2023, the FBI and Homeland Security Investigations received over 13,000 reports of online financial sextortion of minors. The sextortion involved at least 12,600 victims—primarily boys—and led to at least 20 suicides.” The article also contained several resources on the topic.
As fraud expert Frank McKenna has pointed out, deepfakes don’t even have to be that good to work. And as AI becomes gets smarter and more widely available, we can expect them to become more pervasive -- with alarming efficacy. This will also escalate the risks involved in adult content.
Offering adult content can expose payment providers to many types of risk. These include legal and compliance and reputational risk, fraud and scams, payment disputes and chargebacks, third-party issues, and problems related to recurring billing and subscriptions. To mitigate these risks before damage can be done, payment providers need the tools to quickly detect and assess merchants as well as monitor them on an ongoing basis.
EverC can help to identify merchants that are potentially involved in suspicious or criminal activity, even when their activity is purposely hidden. Our technology leverages AI for increased speed and precision in detection rates, enhancements to features and tools, and unmatched customization capability, for solutions that allow you to meet your business goals while aligning with your RBA and industry priorities.