U.S. FinCEN Director Expands Prepaid Access Regulations

The following remarks were made by James H. Freis, Jr., Director of Financial Crimes Enforcement Network on October 5, 2011 at the Money Transmitter Regulators Association Annual Conference.

The full transcript is published here, but I highlighted the "prepaid access" regulatory changes below:

"Let me first discuss the most recent expansion of FinCEN’s AML/CFT regulations to establish a more comprehensive regulatory approach for prepaid access. Because prepaid access is a type of money transmission, FinCEN issued a final rule in July of this year, that puts in place suspicious activity reporting (SAR), and customer and transactional information collection requirements on providers and sellers of certain types of prepaid access similar to other categories of money services businesses.

The final rule:

- Renames 'stored value' as 'prepaid access' 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 prepaid access products of $1,000 or less and payroll 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.

- Clarifies that a 'provider' of 'prepaid access' for a prepaid access program can be designated by agreement among the participants in the program or will be determined by their degree of its oversight and control over the program – including organizing, offering, and administering the program. Providers are required to register with FinCEN."

In closing, Director Freis referenced an even broader international objective focused on money service businesses located in foreign jurisdictions:

"Finally, I would like to build upon the closing point in my speech at this event last year. Now that FinCEN has established a solid regulatory framework for prepaid access in the United States, we must continue to promote analogous steps in foreign jurisdictions to mitigate risks of criminal abuse while still facilitating legitimate consumer demands. I welcome industry and governmental cooperation to that end."

For further reading:
"Regs Would Require Travelers To Declare Prepaid Cards At Border Crossings", Joe Palazzolo, WSJ Blogs, October 5, 2011
"FinCEN's New rule adaptable to 'internet system'", Bitcoin Money, October 5, 2011
"U.S. aims to track 'untraceable' prepaid cash cards", M. Alex Johnson, msnbc.com, September 1, 2011
"FinCEN Brings KYC Requirements To Bitcoin?", Bitcoin Money, August 5, 2011
"Bank Secrecy Act Regulations—Definitions and Other Regulations Relating to Prepaid Access", Federal Register, July 29, 2011