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The Green Sheet Online Edition

July 12, 2010 • Issue 10:07:01

SP
FinCEN seeks comprehensive AML framework

The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, proposed new rules designed to provide guidelines for financial services businesses to follow in the reporting of possible instances of terrorist financing, money laundering and other electronically based financial crimes.

The Notice of Proposed Rulemaking (NPRM), mandated under the Credit Card Accountability Responsibility and Disclosure Act of 2009 and entitled Amendment to the Bank Secrecy Act Regulations - Definitions and Other Regulations Relating to Prepaid Access, covers prepaid cards and devices that facilitate prepaid card transactions, such as mobile phones and key fobs.

Proposed changes

FinCEN wants to rename "stored-value" - the catchall term for prepaid accounts where funds are loaded and stored for future use - as "prepaid access." FinCEN said the name change is not intended to redefine the parameters of prepaid cards and other instruments, but to "allow for future changes in technology and prepaid devices."

In addition, FinCEN proposes to substitute the terms "issuer" and "redeemer" for "provider" and "seller," respectively, because the latter terms are "not useful as the primary focal point for our regulatory efforts."

FinCEN also wants to place registration requirements on prepaid card providers in order to enhance suspicious activity reporting, customer information keeping and transactional recordkeeping. Furthermore, the bureau plans to exempt from the regulations some types of prepaid cards and services that pose lower risks of being exploited for money laundering and terrorist financing.

Reasoning

According to FinCEN, the proposed regulations are intended to shore up regulatory gaps that have arisen due to the growth of the prepaid card industry in the last decade, creating a regulatory environment in which new products and innovations are not addressed.

"If these gaps are not addressed, there is increased potential for the abuse of prepaid access as a means of furthering money laundering, terrorist financing and other illicit transactions through the financial system," FinCEN said.

FinCEN added that it is attempting to strike a balance between regulatory oversight "without impeding continued development of the industry." For more information on FinCEN's directives concerning the prepaid card industry and anti-money-laundering efforts, read "What is stored-value?" in the Oct. 16, 2009, edition of SellingPrepaid E-Magazine.

To view FinCEN's NPRM, go to www.fincen.gov/statutes_regs/frn/pdf/Prepaid%20Access%20NPRM.pdf.


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