The Green Sheet Online Edition
September 28, 2026 • 26:09:02
Legal ease
Payments throughout the Americas: Legal issues when taking on the hemisphere
Just because there are all kinds of tariffs does not mean you can't open an ISO north or south of the border; merchants need processing wherever they are and the skills of a U.S. ISO are valuable outside of the United States. The purpose of this article is to highlight some of the key legal issues when expanding into the rest of the Americas—Canada, Mexico and beyond.
You're not in Kansas any more
I'll never forget being called to provide expert testimony for a Belize court. The white-pillared and teak-paneled courthouse was beautiful but without air conditioning in 100-degree weather. It turns out that Belize, a country founded by English pirates in the mid-17th century, is part of the old British Commonwealth, now the Commonwealth of Nations, a group of 56 independent countries, most of which were once part of the British Empire.
I learned that day in Belize court that part of the Commonwealth is the exchange of judges. The judge presiding over my client's case in Belize City was actually from Africa on exchange in Belize. I was about to learn that Belize judges on exchange from Africa do not want to hear opinions from experts that are too pointed.
When I expressed my opinion on the legally correct outcome of the case—that the bank owed some millions of dollars to my ISO client—the judge promptly dressed me down. He was entirely put out because I had the gall to tell the court what I thought was the correct outcome of the case.
The point of this story is to share a first principle of foreign payments businesses: you're not in Kansas anymore! Cultural and legal expectations often vary significantly from typical U.S. scenarios. An ISO expanding to another part of the Americas should have a local business partner and/or a local attorney who can set expectations for the legal framing of local relationships.
In the end, my client won the case but never collected. As is the case in so many jurisdictions, winning a court case is only the beginning of getting justice.
Canada: Easiest of all
Expanding into Canada is often as easy as adding a Canadian pricing addendum to your existing U.S. ISO agreement. Large U.S. processors treat Canada as a +1 without many complications. Some U.S. ISOs will be required to incorporate a Canadian company, which is easy and takes only a few days.
The most common jurisdiction for a Canadian company these days is British Columbia because companies incorporated there can have 100 percent U.S. directors and shareholders. Despite all the trade drama between the United States and Canada, there is still an effective tax treaty in place between the two countries that means you will not be caught paying tax twice on the same revenue.
Depending on the acquirer and the services to be offered in Canada, a Canadian incorporation may or may not be necessary. Reckoning with Canadian taxes is not rocket science and can be handled easily by a Canadian accounting firm, preferably one with which your U.S. accounting firm already has a working relationship.
There is actually law in Canada on merchant services in the form of the Federal Code of Conduct for the Payment Card Industry in Canada. The "Code of Conduct," as it is called, mandates transparency in pricing, prior notice of fee increases, a merchant right to terminate for non-pass-through fee increases and other consumer-protection-style rights for merchants. The Code of Conduct makes merchants a little harder to hold on to, but it also tilts the market slightly toward greater competition.
An ISO that has gateway technology or provides PCI-compliant card tokenization will fall under a substantial regulatory burden, having to register with the Bank of Canada as a Payment Service Provider (PSP). PSP status brings with it a substantial compliance burden and a duty to file certain reports with the Bank of Canada. But a sophisticated ISO will find all of those requirements well within reach.
Canada has no agent-of-the-payee exemption, so if the ISO handles funds, it is a money transmitter under Canadian law and has a high compliance barrier in terms of AML, sanctions, transaction screening and the like.
Mexico Lindo
Expanding into Mexico is a little more complicated than expanding into Canada. Depending on the acquirer and the ISO's role, expansion may be handled through an addendum to the existing U.S. relationship. If a Mexican company is required, foreign investors can own 100 percent of it. Mexico also has a tax treaty with the United States that prevents the same income from being taxed twice.
Mexico has specific federal rules governing card acquiring. Unlike Canada's Code of Conduct, which focuses heavily on merchant rights and pricing disclosure, Mexican regulation focuses more on card networks. Of particular importance is the regulated category of Aggregator.
An ISO that contracts with merchants to provide card acceptance under an arrangement with an acquirer may qualify as an Aggregator and needs to use a Mexican company. A pure sales or referral ISO, with the acquirer contracting directly with the merchant, is easier to implement.
Mexico does not have a direct equivalent of Canada's Bank of Canada PSP registration regime. However, an ISO that handles funds, provides merchant acquiring or aggregation, or offers other regulated payment services may come within Mexico's payments or fintech law framework.
LATAM
Each of the other countries in Latin America has its own payment regulations, but most leave room for a sales relationship with a legal light touch.
Sanctions and AML
Foreign merchants may present irresistible volumes and willingness to pay fees. Be careful. Some of these merchants are fronting for sanctioned individuals (that is, OFAC-listed persons) or are otherwise laundering funds. It is illegal under U.S. law for a U.S. person to assist in breaching U.S. sanctions or money laundering laws even if the activity takes place entirely outside of the United States. Despite these considerations, there's nothing stopping you from taking your payment skills on the road in the Americas. 
In publishing The Green Sheet, neither the author nor the publisher are engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. For further information on this article, please contact Adam Atlas, Attorney at Law email: atlas@adamatlas.com, Tel. 514-842-0886.
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