On July 29, 2011 the Financial Crimes Enforcement Network of the Department of Treasury (FinCEN) issued its final rule regarding “Prepaid Access” (the Final Rule). The Final Rule applied anti-money laundering (AML) requirements to certain prepaid cards, including some gift cards.
Generally, the Final Rule requires retailers to implement internal procedures designed to reduce the risk of money laundering and impose certain data collection and reporting requirements. Key elements of the Final Rule include:
- Closed loop gift card sales in excess of the $2,000.00 per card and $10,000.00 per day per person thresholds now require retailers to maintain a formal AML program which includes written AML policies, controls, procedures, record-keeping, training, and monitoring to ensure compliance with the requirements.
- Closed-loop gift cards are exempted from these rules if sold or reloaded in amounts of $2,000 or less.
- Retailers must take precautions to avoid sales of more than $10,000 to any one person in a single day.
- Business-to-business sales (bulk sales) of gift cards are exempted from the new rules.
- The Final Rule contains a limited exemption for prepaid access to funds of up to $1,000, from which no more than $1,000 can be initially or subsequently loaded, used or withdrawn through a device or vehicle on any day. This exemption applies only if certain restrictions exist regarding: (i) funds or value to be transmitted internationally; (ii) transfers between or among users of prepaid access within a prepaid program; and (iii) loading additional funds or the value of funds from non-depository sources.
- Merchandise returns loaded to a merchandise credit (gift card) are treated as a closed-loop gift card subject to the new rules.
- Reporting of transactions above $2,000 is required if the transaction is suspicious.
- Providers of prepaid access must retain records (including, name, date of birth, address, and identification number) for a period of five years after the last use of the prepaid access device and register with FinCEN.
Retailers can elect to structure their programs to avoid being treated under these new rules by simply limiting card load or reload to $2,000.00.
Retailers that do not wish to limit load or reload value to $2,000.00 must be able to collect customer identification information upon card loading such as name, birth date, address, and identification number, and maintain a formal AML policy.
Additional information regarding these rules may be found at http://www.fincen.gov.
The Final Rule can be located via the following link:
http://www.gpo.gov/fdsys/pkg/FR-2011-07-29/pdf/2011-19116.pdf
