Prepaid/Stored Value Card Providers and Sellers: Prepare to Monitor for Suspicious Activity

On July 29, 2011, the Financial Crimes Enforcement Network (FinCEN) issued a Final Rule that modifies the government's treatment of stored value, prepaid cards, and other prepaid access products under the Bank Secrecy Act (BSA) regulations. The Final Rule replaces FinCEN's current construct of treating "issuers and redeemers" of stored value separately from other Money Service Businesses with one in which "providers" and "sellers" of "prepaid access" are subject to BSA requirements. The nuanced definitions given to these terms in the Final Rule will require participants in the prepaid area to analyze carefully their activities to determine their formal role in the process. Most notably, under the Final Rule "providers" of prepaid access will be responsible for suspicious-activity monitoring and reporting, as well as for other registration, customer identification, and recordkeeping activities. "Sellers" of prepaid access will share in each of these requirements, except for the registration requirement, for which the provider will retain sole responsibility. The Final Rule covers prepaid devices such as plastic cards, mobile phones, electronic serial numbers, key fobs, and other mechanisms that provide access to funds that have been paid for in advance and are retrievable and transferable by replacing the term "stored value" with the term "prepaid access." The changes made by the Final Rule have the potential to impact significantly the relationship among participants in the prepaid industry, as well as the products they sell. Industry participants should review their operations to determine the extent to which any revisions may be necessary to existing policies and procedures in light of the Final Rule. In addition, industry participants must assess their prepaid programs to determine who will become the "provider" for registration and other compliance purposes, lest FinCEN make the decision itself. In light of the compressed timeframes imposed by the Final Rule, it is important that such assessments commence promptly. For more details on the Final Rule, click here. – Beth DeSimone and Jeremy Hochberg

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