A Thing
The Green SheetGreen Sheet

The Green Sheet Online Edition

May 13, 2013 • Issue 13:05:01

New approach urged for cross-border enforcement

sellingprepaidThe move by the Financial Crimes Enforcement Network (FinCEN) to combat money laundering at border crossings by implementing controls on prepaid cards is being met with resistance from the Network Branded Prepaid Card Association. The NBPCA said FinCEN's proposal would not only be ineffectual in combating money laundering, but would also waste time and resources by placing controls on products that aren't being used to launder money in the first place.

The NBPCA's April 2013 white paper, A Solution in Search of a Problem: The Challenges and Unintended Consequences of Government Inspection of Bank-issued Prepaid Cards at our Nation's Borders, said FinCEN's October 2012 proposal to include prepaid cards as monetary instruments covered under the anti-money laundering (AML) provisions of the Bank Secrecy Act, and to implement procedures and technology to check the balances of prepaid cards at border crossings, is flawed.

The NBPCA characterized FinCEN's Notice of Proposed Rule Making (NPRM) as "overly broad" in lumping different types of prepaid cards into one category in order to regulate them. Additionally, the association pointed out that prepaid cards are already heavily regulated financial instruments, with network-branded, general-purpose reloadable (GPR) cards already subject to AML regulations via banks that issue the cards and money transmitters that offer them to consumers as cross-border money transfer tools.

Anonymous, anecdotal

The NBPCA also attempted to dispel apparent fallacies in FinCEN's NPRM, namely that prepaid cards render users anonymous, which makes the cards more likely vehicles for laundering illegal proceeds. "Issuers of reloadable, cash-accessible prepaid cards are required to collect identifying information from the cardholder and to verify the cardholder's identity before issuing such cards or before allowing such cards to be reloaded or to access cash," the NBPCA said, adding that this information is comparable to what banks collect on individuals who open checking and savings accounts.

The issues of prepaid usage geographically and the actual usage of prepaid illegally were addressed as well. The NBPCA said that the "overwhelming majority of U.S.-issued prepaid card volume is transacted within the U.S," which dispels assertions that the cards are being used for cross-border money laundering and other criminal purposes.

The NBPCA also stated that law enforcement has not offered much concrete information about prepaid card usage for the cross-border transportation of funds. "The prepaid industry is very interested in understanding what law enforcement is finding related to network-branded prepaid accounts," the association noted. "Thus far, only a few anecdotes have been shared."

Unintended, inadvertent

Furthermore, the association raised the issues of consumer privacy and "inadvertent misrepresentation." It called the act of examining accounts on individuals' prepaid cards as a "troubling violation of privacy rights." Under FinCEN's plan, border agents would have to scan prepaid cards through readers to access account balances and other personal cardholder information, the NBPCA said.

And GPR cardholders may not always know the balances on those accounts, which could result in unintentional violations of regulations. "This could easily happen, for example, with prepaid cards that are reloaded with benefits paid by government agencies or by employers that use prepaid cards to distribute benefits or wages," the NBPCA said. "In such cases, a consumer wouldn't know when the funds had been loaded without verifying first."

The NBPCA concluded that FinCEN's proposal would "do little to advance the critical cause of combating cross-border money laundering and criminal transport, and would impede access to the financial mainstream for those who choose prepaid cards, sometimes as their primary account."

A more productive solution, according to the association, would be for FinCEN to draw together regulators, law enforcement, community leaders and industry representatives to analyze money laundering threats and craft targeted, risk-based solutions. "While this process would require the commitment of effort and resources from the various stakeholder groups, the result would be more appropriate and would address this serious issue without triggering the unintended negative consequences of the currently proposed rules," the NBPCA said. end of article

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

Prev Next
A Thing