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Four Months after Deadline, Prepaid Companies Have Yet to Say Who’s on the Hook
By Brian Monroe
printDisputes and confusion over which companies will be responsible for anti-money laundering rules on stored value products has delayed federal registration and oversight of the sector, say industry representatives. Last year, the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) ordered financial institutions, retailers and others cooperating on cards to determine which entity would register with the bureau by March 2012 as a "provider of prepaid access." The provider would be responsible for compliance rules finalized by FinCEN in July 2011. But more than four months after the rule's compliance deadline, many of the various financial institutions that work together...
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Prompted by signs that criminals are increasingly exploiting prepaid cards, federal and state investigators are turning to a handful of recent legal decisions to justify reading the value held on the instruments, sources say.
An apparent decision by White House officials to postpone the issuance of final rules governing the cross-border transport of prepaid access products has once again drawn criticism from U.S. lawmakers.
A congressionally-mandated plan to require U.S. border crossers to declare funds held on prepaid cards remains stalled at the White House more than a year after its submission for final review.
The theft of $45 million by cybercriminals exploiting and manipulating stolen prepaid card data highlights weaknesses in how financial institutions monitor the use of stored value products, say security experts.
U.S. lawmakers Thursday criticized federal officials for delays in finalizing anti-money laundering rules and failing to prosecute banks and bankers that facilitate billions of dollars in illicit transactions.
As U.S. officials work to shield American prepaid cards from abuse by financial crooks, foreign-issued stored value products remain a relatively easy avenue to move money into the United States anonymously.
Lobbying by the world's largest stored value payment facilitator has indefinitely delayed, and perhaps permanently blocked, a plan to give customs officials the ability to read prepaid cards, say sources.
Trade-based schemes and bulk cash smuggling are among the most common tactics used by international money launderers, according to Joseph Gallion, the deputy assistant director of the Financial, Narcotics and Special Operations Division for the Homeland Security Investigations (HSI).
American officials will begin field-testing prepaid card readers at U.S. border stops next month as part of the lead-up to the Treasury Department regulations governing their cross-border transport, say officials.
The U.S. Treasury Department Tuesday prescribed new compliance rules on the prepaid product industry, a sector largely unregulated despite concerns about its vulnerability to money launderers.
Several banks are asking the U.S. Treasury Department's financial crimes bureau for the unthinkable: more anti-money laundering compliance responsibilities.
Proposed regulations by the U.S. Treasury Department on the prepaid card industry are raising questions and concerns among anti-money laundering compliance consultants on how the rules can be implemented and enforced.
Money services businesses and sellers of stored value cards will know this summer whether final rules by the U.S. Treasury Department will increase their anti-money laundering compliance duties and costs.
The U.S. Treasury Department will miss a Feb. 22 deadline set by Congress to implement rules subjecting stored value cards to the Bank Secrecy Act, according to consultants and bank lobbyists.
The U.S. Treasury Department remains on schedule to issue regulations early next year that will bring stored-value cards under the purview of the Bank Secrecy Act, according to a government official.
Money services businesses do not need to keep separate bank accounts for their different business lines to comply with the Bank Secrecy Act, according to a U.S. Treasury Department ruling.
The European Union proposed rules Tuesday on how electronic money might be issued, a step meant to further expand the market for prepaid and stored value payment products.
U.S. Senator Charles Grassley, who last year proposed a bill that would expand the power of prosecutors to include money laundering charges in a criminal case, will amend the proposal to account for "new and emerging trends," in stored value and prepaid cards and other issues.
Financial institutions introducing the popular programs should review the hiring practices and other due diligence procedures of the employers seeking to participate in the programs, compliance professionals say.
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