29 August 2016
Find out more

US regulators turn attention to pre-paid money laundering threat

23 June 2010  |  10725 views  |  0 Security/Risk

In a bid to tackle money laundering and terrorist financing, the US Financial Crimes Enforcement Network (FinCEN) has proposed new rules to tighten regulatory control of non-bank pre-paid devices.

The government agency proposal would make non-bank providers of pre-paid devices such as plastic cards, mobile phones, electronic serial numbers and key fobs, subject to comprehensive Bank Secrecy Act (BSA) regulations similar to depository institutions.

The changes would "impose obligations on the party within any given pre-paid access transaction chain with predominant oversight and control, as well as others who might be in a position to provide meaningful information to regulators and law enforcement, such as prepaid access sellers".

The move is designed to help regulators catch up with the rapid and extensive innovation seen in pre-paid services over the last 10 years, and the medium's increasing popularity.

If the current "gaps" are not filled, the anonymity and ease of access of pre-paid devices opens them up money laundering and terrorist financing, says the FinCEN.

The proposals would see the renaming of "stored value" as "prepaid access" to allow for future changes in technology and pre-paid devices. The terms "issuer" and "redeemer" would also be dumped in favour of "provider" and "seller".

Registration requirements would be placed on providers of pre-paid access and suspicious activity reporting, customer information recordkeeping and new transactional record-keeping requirements on both providers and sellers of prepaid access.

The proposal has been submitted to the Federal Register and is open for comment for 30 days.

The move comes as Ana Cavazos-Wright, a senior payments risk analyst in the retail payments risk forum at the Atlanta Fed, warns on the money laundering threat posed by pre-paid mobile payments.

Cavazos-Wright highlights the emergence of digital value smurfing, where crooks break down large sums of money before moving it electronically without triggering currency reporting requirements.

If smurfers are able to transfer stored value funds from one mobile phone to another or to other devices without using a bank for the transfer, they would bypass financial reporting requirements and hamper monitoring and detection efforts, she warns.

However, some vendors are improving their security and a government bill has also recently been introduced that would institute an identification requirement for the purchase of pre-paid mobile devices in a bid to close this anonymity gap.

Comments: (0)

Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

UK men jailed over iTunes gift voucher money laundering scam

UK men jailed over iTunes gift voucher money laundering scam

17 May 2010  |  10118 views  |  0 comments
Pre-paid card firm CEO fears for safety after Mossad hit

Pre-paid card firm CEO fears for safety after Mossad hit

08 April 2010  |  6953 views  |  0 comments
European pre-paid market poised for growth - First Data

European pre-paid market poised for growth - First Data

27 November 2009  |  10666 views  |  2 comments
PayPal found in breach of Australian anti-money laundering rules

PayPal found in breach of Australian anti-money laundering rules

23 November 2009  |  10192 views  |  0 comments
Prepaid accreditation scheme launched to counter negative publicity

Prepaid accreditation scheme launched to counter negative publicity

10 July 2008  |  6078 views  |  0 comments
Money launderers abusing m-payments networks, US warns

Money launderers abusing m-payments networks, US warns

12 March 2008  |  7996 views  |  0 comments

Related blogs

Create a blog about this story (membership required)
Visit capgemini.comVisit www.abe-eba.euFind out more

Top topics

Most viewed Most shared
hands typing furiouslyBig Data's Three Big Trends in 2016
8356 views 5 | 22 tweets | 13 linkedin
hands typing furiouslyHow Banks Are Losing Millions by Ignoring...
7942 views 11 | 24 tweets | 10 linkedin
India's Unified Payments Interface goes live with 21 banksIndia's Unified Payments Interface goes li...
6977 views comments | 16 tweets | 20 linkedin
Nordea looking for AI and blockchain breakthroughsNordea looking for AI and blockchain break...
6812 views comments | 17 tweets | 21 linkedin
R3 blockchain consortium sheds light on Concord projectR3 blockchain consortium sheds light on Co...
6327 views comments | 14 tweets | 14 linkedin

Featured job

Find your next job