FinCEN Regulations Target Prepaid Program Managers and Sellers

by Ben Jackson 0

By Ben Jackson, Sr.Analyst, Mercator’s Prepaid Advisory Service

On June 28, 2010, the FinancialCrimes Enforcement Network (FinCEN) published proposed rules toamend Bank Secrecy Act regulations governing prepaid cards.

The proposed rules would set outreporting requirements for non-bank companies that are involved inproviding prepaid cards, redefine regulatory terms, and exemptcertain kinds of cards from reporting requirements.The Networkproposed these rules because it sees risk for money laundering inthe prepaid industry and because it sees gaps in the currentregulations.

The rules do not add to or changethe existing requirements on banks or other financial institutionsthat issue the cards. FinCEN writes in its notice that depositoryinstitutes are already subject to a “full slate of anti-moneylaundering (‘AML’) obligations and those responsibilities will notchange as a result of this rulemaking.” Instead, they putrequirements on Money Services Businesses (MSBs) that provideaccess to prepaid cards. With these rules, FinCEN’s stated goal is”to bring non-bank entities in the prepaid sector under regulatorytreatment that is more consistent with other financialinstitutions, such as depository institutions, subject to the [BankSecrecy Act].” These proposed regulations could mean changes formembers of the prepaid industry – particularly programmanagers.

Prepaid card issuers, programmanagers, and sellers should pay careful attention to these rulesand how they evolve in order to ensure compliance. The initialcomment period closed on August 27. Depending on the commentsreceived and the time FinCEN needs to review them, we could see afinal rule before the end of the year.

This note should not takethe place of competent legal advice in regards to compliancerequirements.

The proposed rules can befound at:

http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201004&RIN=1506-AB07

Read related Mercatorviewpoint:http://mercatoradvisorygroup.com/index.php?doc=Prepaid&action=view_item&id=511&catid=16