President Trump signed FOSTA (Fight Online Sex Trafficking Act) into law on April 11, dropping a bomb on the online payments industry, sex workers and the Internet entirely. The bill, passed by Congress at the end of March, broadly makes any “any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server” liable when their platforms are used to assist, support, or facilitate prostitution or sex-trafficking.
The act is targeted at providers of “interactive computer services”; a loosely-interpreted label that can mean any service that provides or enables computer access to multiple users through a computer server. In other words, it encompasses a huge grouping of players in the online payment industry – payment service providers, payment facilitators, gateways, hosting providers, and other merchant service providers.
Specifically, House Resolution 1865 was designed to roll back protections afforded under Section 230 of the Communications Decency Act that gave providers of “interactive computer services” immunity from civil liability if their users published objectionable content. Section 230 was linchpin Internet legislation, allowing online merchant service providers to disavow civil (though not criminal or intellectual property) wrongdoings of the consumers of their services.
The problem was that Section 230 also provided “cover” for sites like Backpage.com (recently making the news for its shutdown by the FBI) and sections of sites like Craigslist that allegedly facilitated human trafficking and the sex trade online. According to its proponents, FOSTA enables better enforcement of federal civil and criminal law as it relates to prostitution and sex trafficking. This means that if criminals are using online services, like Craigslist, to conduct any activity related to human trafficking, the website owner (ie: Craigslist) can be held liable, not just the criminals themselves.
The bill has a significant core of opponents, too. Advocates of civil liberties are concerned about free speech, citing the bill’s potentially broad application. Sex industry pundits decried the bill for eliminating the option for sex workers to screen clients before meeting them. There have also been warnings that the bill will actually get in the way of law enforcement efforts to track pimps, build criminal cases, and find missing children.
Whatever the positions, the market quickly responded. Both Craigslist and Reddit immediately shut down their Personals sections as a reactionary measure to the bill passing.
How FOSTA Affects the Payments Industry
FOSTA removes the previously-stated immunity, now also placing responsibility on the payments service industry for their merchant violations.
The incredible volume of daily activity online – new content, postings, data exchanges and transactions – creates a massive undertaking for anyone who falls into the “interactive computer services” category to comply with FOSTA regulations.
Although the impact hasn’t been fully realized by the media and companies affected, FOSTA has the potential to seriously shake up the payments industry. With the act now in effect, there is no grace period for any “interactive computer service” with FOSTA violations. Immediately effective, they need to comply with this regulation by ensuring that the websites they process payments for or host are in compliance with FOSTA.
These “interactive computer services” now face a critical monitoring challenge to ensure FOSTA compliance. How can they know the true content of the websites they work with when their content seems ever-changing? How can they know if sex trafficking or prostitution is being disguised on the websites they do business with?
What Can be Done?
The violations that fall under FOSTA, and their subsequent liabilities, make understanding the true identity of online entities crucial for the entire payments industry. Whether you are a merchant service provider, marketplace, hosting provider, or payment service provider, it is important to have the tools to effectively and efficiently monitor the known and unknown websites connected to your business to stay in compliance with FOSTA.
AI and machine-learning based solutions, like those offered by EverCompliant, provide ongoing monitoring of website portfolios to identify, surface, and prevent violations including maintaining FOSTA compliance.