Treasury Department Issues Final Rule on “Prepaid Access” Under the Bank Secrecy Act


On July 27, 2011, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) released its much anticipated final rule (Final Rule) applying the anti-money laundering requirements of the Bank Secrecy Act to certain open and closed-loop prepaid payment products in a comprehensive manner for the first time.

The Final Rule redefines “stored value” as “prepaid access” and imposes significant regulatory obligations on both “providers” and “sellers” of “prepaid access,” including certain anti-money laundering program, reporting and recordkeeping requirements. Notably, in response to public comment, the Final Rule significantly enlarges the exemptions for closed-loop retailer gift card programs and narrows the definition of “seller of prepaid access,” as compared to the proposed rule. A copy of the Final Rule, as published in the Federal Register, is available here.

Overall assessment

The scope of the Final Rule reflects FinCEN’s effort to balance persistent law enforcement concerns about the abuse of “prepaid access” programs for money laundering1 against strong consumer demand for such products as reflected in the growth of the industry. While the Final Rule suggests FinCEN gained important industry insight as to the value of prepaid programs during the rulemaking process, the Final Rule may still have a significant adverse impact on the development of innovative payment systems and products. The efficacy of the Final Rule in preventing money laundering or terrorist financing remains to be seen, and the case for the necessity of the Final Rule remains—at most—incomplete.

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