In response to continuing concerns about the vulnerability of prepaid cards to criminal and terrorist abuse, five regulators issued interagency joint guidance today clarifying bank obligations to identify prepaid card accountholders under the existing regulations implementing the “Customer Identification Program” or “CIP” requirements of the USA PATRIOT Act. The Agencies intend the guidance to remind banks that money laundering and other criminal risks related to prepaid cards “require the implementation of strong and effective mitigating controls.” The five regulators are the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Office of the Comptroller of the Currency, and the Financial Crimes Enforcement Network (collectively, “the Agencies”).

The guidance makes clear that banks have a CIP obligation with respect to individual cardholders of general purpose prepaid cards that have features similar to a deposit account, regardless of whether the funds are held in a pooled account or whether the prepaid program is managed by the bank or by a third party on behalf of the bank. These clarifications should not be surprising to most prepaid program participants, as they are consistent with the purpose of the CIP regulations. But the increasing prevalence of prepaid products in the marketplace and some unspecified “questions [that] have arisen” led the Agencies to issue the guidance.