The Financial Crimes Enforcement Network (FinCEN) has published in the Federal Register its long-awaited final rule on “prepaid access” (formerly known as “stored value”). The result was worth the wait, with substantial improvements that should significantly reduce the regulatory burden the proposed rule would have created.
Highlights of the final rule include the following:
- Issuers, sellers, and redeemers of prepaid access are no longer exempt from anti-money laundering (AML) requirements.
- Exemptions from AML requirements are established for prepaid access products that (1) limit maximum value, and daily loads and transactions, to $1,000, and products that are funded solely through wages and employee benefits, so long as such products cannot be used internationally, do not permit person-to-person transfers, and cannot be reloaded from a nondepository source; (2) provide closed-loop access to a maximum of $2,000 on any day; and/or (3) are solely government (federal, state, local, or tribal) funded or solely derived from arrangements for pretax flexible spending for health and dependent care
- The “provider” responsible for maintaining access to required transactional information and providing such information to FinCEN upon request must be designated by the participants in a prepaid access program and identified on FinCEN registration forms.
- Sellers of prepaid access devices must maintain an AML program, file suspicious activity reports, and comply with recordkeeping requirements regarding customer identifying information if (and only if) the prepaid access products they offer are covered by the rule and can be used without a later activation process that includes customer identification or if they sell any prepaid access product that provides more than $10,000 to any person during any one day (or fails to have procedures in place designed to limit use below this threshold). This is a significant narrowing of coverage from the proposed rule—one that makes the final rule far more workable.
- The rule is effective September 27, 2011 (January 29, 2012, for its registration requirements).