What type of risks does compliance primarily address within payment systems?

Compliance primarily addresses regulatory and legal risks within payment systems. This is because the primary function of compliance is to ensure that organizations operate within the bounds of laws, regulations, and standards set forth by governmental and supervisory bodies.

In the context of payment systems, compliance involves adhering to regulations concerning anti-money laundering (AML), know your customer (KYC) protocols, data protection, and other legal guidelines that govern financial transactions. By focusing on these areas, compliance helps to mitigate the risks associated with non-compliance, which can lead to significant penalties, reputational damage, and operational interruptions for businesses involved in payment processing.

Understanding the importance of regulatory and legal risks is crucial in the payments landscape, as these risks can change based on shifting regulations or legal interpretations, making compliance an ever-evolving challenge for organizations. This dedicated focus on regulatory adherence ensures that payment systems are safe, secure, and aligned with the expectations of both regulators and the public.