USA LAW AND PRACTICE Contributed by: Margo H.K. Tank, Michael Fluhr, Era Anagnosti, Kristin Boggiano, David Stier, Liz S. M. Caires, Adam Dubin, Emily Honsa Hicks, Kathleen Birrane and Chezelle McDade, DLA Piper LLP
Lender-raised capital can be generated through debt financing or equity financing. Private equity and ven - ture capital firms may provide funding for special - ised loans, such as those for start-up businesses in exchange for equity in the borrower. Institutional investors may provide funds for debt-financed trans - actions. Banks and other deposit-taking institutions are the most common source of loan funds. 4.4 Syndication of Fiat Currency Loans Syndication is a common practice in the USA and allows lenders to participate in bigger financing opportunities by sharing loan risks with other lenders. The syndicate agent (a lead financer) will co-ordinate the syndication process, including structuring the loan terms, finding lenders to participate, and performing due diligence. There is one loan agreement for the entire syndicate, with each lender’s liability limited to its respective share of the loan interest. Loan syndications typically meet industry standards and best practices set forth by the Loan Syndica - tions and Trading Association (LSTA). LSTA provides standardised documentation and guidelines for vari - ous aspects of loan syndications. Lenders participat - ing in a syndication are also subject to federal or state laws that would otherwise be applicable, as described in 4.1 Differences in the Business or Regulation of Fiat Currency Loans Provided to Different Entities , as well as any other regulations that may be applica - ble to the type of lender and jurisdiction. It is common practice in certain industries to syndi - cate electronically originated promissory notes, loans, and leases secured by collateral such as real estate or a vehicle. ESIGN and UETA, and UCC Articles 3 and 9, support and enable pooling, transfer, and syn - dication of such transferable records and electronic chattel paper. 5. Payment Processors 5.1 Payment Processors’ Use of Payment Rails In the USA, firms involved in the processing of pay - ments are generally separate legal entities from the
payment networks that operate the “rails” through which payment information flows. Payment proces - sors typically transmit or submit credit or debit card transactions for authorisation through the card pay - ment networks and arrange for settlement to the bank accounts of the underlying merchant or payee that accepted the card for payment. US laws and regulations do not prevent a payment processor from creating its own set of payment “rails” through which to transmit payment information. How - ever, the high transaction volume needed to drive suf - ficient payor interest and achieve a critical mass of merchant or payee acceptance of the new payment network serves to limit the development of new pay - ment networks. 5.2 Regulation of Cross-Border Payments and Remittances Cross-border payments and remittances are subject to a US financial regulatory framework which address - es consumer protection, AML/CTF, and/or commercial efficiencies. Federal consumer protection laws such as the EFTA and Regulation E, as well as state law equivalents, generally require a cross-border or remittance trans - fer provider to comply with certain obligations, such as providing clear and accurate disclosures prior to payment regarding the fees to be charged and the ultimate timing of delivery to the intended recipient. A remittance provider must also provide receipts with similar disclosures for consumer retention. Addition - ally, state laws require money services businesses to obtain a licence, meet certain net worth and bonding requirements, and retain permissible assets to sup - port their activities. Remittance transfer providers may be a subset of money services business required to adopt AML/CTF compliance programmes under the BSA which require the provider to conduct due diligence on their custom - ers (KYC), engage in ongoing transaction monitoring for suspicious transmissions or money movement involving illegal activity, and meet transaction report - ing requirements. See 2.15 Financial Action Task Force (FATF) Standards .
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