FinCEN proposing adding prepaid cards to anti-money laundering reporting system

By Christine Duhaime | June 22nd, 2010

The U.S. federal regulatory agency, Financial Crimes Enforcement Network (FinCEN), is proposing amendments to the Bank Secrecy Act regulations that would regulate prepaid cards and similar devices in the U.S. The proposal covers plastic cards, mobile phones, electronic serial numbers, key fobs and mechanisms that provide a portal to funds that have been paid for in advance and are retrievable and transferable. There are four main changes contemplated by the proposed regulations as follows:

  1. Prepaid or stored value card programs would be defined as “prepaid access” and the definition of money services businesses would be amended to include prepaid access businesses;
  2. The terms “issuer” and “redeemer” of stored value would be replaced with the terms “provider” and “seller”. A provider is any person with “principal oversight and control” over one or more prepaid programs. A seller is “any person that receives funds or the value of funds in exchanging for providing prepaid access as part of a prepaid program directly to the person that provided the funds or value, or to a third party as directed by that person;”
  3. Non-bank providers of prepaid access would be subject to comprehensive Bank Secrecy Act regulations similar to depository institutions. Providers would be required to register with FinCEN and establish an AML program, file suspicious activity reports, establish customer identification procedures, and comply with record retention requirements. Sellers would be required to establish an AML program, file suspicious activity reports, and implement customer identification procedures. They do not have to register with FinCEN or provide transaction reports to FinCEN; and
  4. Certain types of prepaid access products and services that pose a lower money laundering or terrorist financing risk would be exempt. They include cards purchased for employment benefits, government benefits or health care benefits, are of limited value (US$1,000 or less), or are limited to a closed-loop prepaid access, and do not allow value to be transmitted internationally or transfers between users.

The proposed rule is open to comments until August 27, 2010.

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