FinCEN Adds to the Prepaid Compliance Officer’s Headache

by Mercator Advisory Group 0

The Financial Crimes Enforcement Network (FinCEN) released its final rules that amend the Bank Secrecy Act regulations in regards to prepaid cards on July 26. Coming in the wake of the final rules implementing the Durbin Amendment to the Dodd Frank Act and the Office of Thrift Supervision’s Cease and Desist Order against prepaid card issuer MetaBank, the new FinCEN rules will add to the work ensuring that a prepaid card program is compliant with all the various government rules, regulations, and expectations.

The final rule:

• Renames “stored value” as “prepaid access,” without narrowing or broadening the meaning of the term, but to more aptly describe the underlying activity.

• Adopts a targeted approach to regulating sellers of prepaid access products, focusing on the sale of prepaid access products whose inherent features or high dollar amounts pose heightened money laundering risks.

• Exempts from the rule prepaid access products of $1,000 or less and pay roll products if they cannot be used internationally, do not permit transfers among users, and cannot be reloaded from a non-depository source.

• Exempts closed loop prepaid access products sold in amounts of $2,000 or less.

• Excludes government funded and pre-tax flexible spending for health and dependent care funded prepaid access programs.

While the rules have a variety of exemptions, making sense of what programs are covered and which aren’t will be a chore. In addition, because the rules require new activities of merchants that sell prepaid cards, a real risk is that some merchants will simply decide that prepaid cards aren’t worth having in the stores. So the real regulatory pinch may come from business decisions rather than court decisions.

Read the FinCEN press release at:

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