Networks Make Their Case as White House Weighs Cross-Border AML Rules (April 2, 2013)
With government officials considering a FinCEN anti-money laundering rule that would require consumers to report when they transport prepaid cards, along with cash and/or monetary instruments, with a value of more than $10,000 into or out of the country, representatives from three payment card networks went to the White House to request the rule be given more consideration before being finalized.
On March 19, representatives from American Express, MasterCard and Visa met with officials from six different government agencies, including FinCEN—the Treasury division that proposed the rule in 2011—and the Office of Information and Regulatory Affairs (OIRA), the White House agency currently reviewing the final rule, which was marked as received by OIRA in February. OIRA has 90 days to approve the final rule or send it back to FinCEN for changes, meaning it would need to act by early May. The White House did not provide details of the meeting, but the regulation reportedly is high on the Treasury’s priority list due to pressure from some Congressional lawmakers.
The rule would add “tangible prepaid access devices” to the list of currency and other monetary instruments that must be reported when transported or mailed into or out of the country when the aggregate value of those items exceeds $10,000. Since the proposed rule was announced, prepaid card providers and industry groups have expressed concern that it would stigmatize prepaid cardholders and could result in prepaid users inadvertently breaking the law when they receive deposits that put them over the $10,000 limit without knowing it. Such concerns also could make customers avoid traveling with prepaid products, industry players fear.
The rule also would be relatively easy for those involved in money laundering to get around, notes Kristine M. Andreassen, an associate with Bryan Cave LLP. Andreassen tells Paybefore that most of the reported incidents of prepaid cards being used for cross-border money laundering likely have involved cards that have little or no value when they cross the border but are loaded once they reach their destination—and thus wouldn’t be required to be reported under the rule as proposed. “[Regulators] are focusing on card balance, but anyone trying to launder money will quickly learn to send cards with a zero balance. So the rule is only going to ensnare the innocent,” she says.
In November, the U.S. Immigration and Customs Enforcement agency began testing prepaid card readers that would enable border agents to check balances on prepaid cards with a swipe. But that program reportedly has been put on hold as of the end of March.