Prepaid International Forum Rips into Proposed EC Prepaid Rules
The European Commission’s proposed changes to anti-money laundering rules would place an “immense burden on the regulated e-money sector,” the Prepaid International Forum argues in a new position paper. The changes would specifically threaten issuers of “low-value, low-risk prepaid payments instruments” in an attempt to make it harder for terrorists and other criminals to fund their activities through prepaid cards.
The paper addresses the EC’s promise to tighten rules for prepaid cards and virtual currencies via proposed amendments to the Fourth Anti-Money Laundering Directive (4AMLD). Among the proposals are lowering the threshold for nonreloadable prepaid cards for in-store payments to €150 (US$166) from €250 (US$277) before cardholder identification is required. The proposal also prohibits online use of reloadable and nonreloadable prepaid cards without identity verification. Closed-loop cards remain exempt from 4AMLD.
“The amendments that purport to tighten controls on the use of prepaid payment instruments cause massive concern to the prepaid industry,” the forum says. The lower threshold, for instance, “discriminates against issuers of low-value, low-risk regulated restricted loop and scheme-badged open loop products that are principally used to service the personal gift (e.g. multi-store gift cards) and corporate reward markets. Further restrictions from the current €250 limit will move higher value gifting and corporate rewards to unregulated alternatives leading to an unfair and distorted market.”
The forum’s position paper asks regulators to maintain the current thresholds for regulated non-reloadable prepaid products. The paper also says that “the industry provides for much stronger capabilities to detect and halt suspicious usage behavior in real-time for the online use of prepaid products than is the case for their offline use.”