NBPCA White Paper Calls for Cooperation to Address AML Concerns (April 16, 2013)
A proposed plan by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) to check prepaid card balances at the U.S. border to combat money laundering will not significantly help solve illegal cross-border funds transfers, according to a new white paper issued by the Network Branded Prepaid Card Association (NBPCA). Instead, the NBPCA said, the agency and the prepaid industry should work together to address the issue in a more effective way that will have fewer detrimental consequences for prepaid card users.
In a notice of proposed rulemaking issued last year, FinCEN said it was considering including “tangible prepaid access devices” in its list of currency and monetary instruments that consumers must report when they transport, mail or ship an aggregate of more than $10,000 into or out of the U.S. Since the notice and subsequent request for industry input were issued, many in the prepaid industry have expressed concern that including prepaid cards under the reporting requirement would stigmatize prepaid cardholders and could result in prepaid users inadvertently breaking the law, while failing to prevent money laundering and other illegal activity.
In the white paper, the NBPCA says that network branded prepaid cards do not meet the true definition of a “monetary instrument,” since they require a PIN to access cash, and funds are not stored directly on the card, but in an account housed at a regulated financial institution. Additionally, the paper notes, prepaid cards are not anonymous; issuers are required to collect identifying information from and verify the identity of the cardholder before issuing a prepaid card, much like a traditional savings or checking account. Furthermore, there is a lack of statistical evidence that prepaid cards are used at any significant rate in illegal cross-border transfers, with law enforcement having thus far provided only anecdotal information on the issue, according to the NBPCA.
A more effective approach to the situation, the NBPCA says, would involve a collaborative effort between “all stakeholders, including regulators, law enforcement, community leaders and industry representatives, to engage in a dialogue aimed at analyzing the threats that exist today and crafting targeted, risk-based solution.” The proposed rule currently is being reviewed by the White House’s Office of Information and Regulatory Affairs, which is expected to approve the final rule or send it back to FinCEN for changes by early May.
