April 12, 2012
New FinCEN Reporting Requirements for Gift Cards
Dear Valued Customer:
On July 29, 2011, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) issued new anti-money laundering rules that in a very extreme instance may likely affect your location(s). These rules govern "prepaid access" and are designed to regulate the use of prepaid products (including "retail" closed-loop gift cards) so
as to prevent money-laundering activities.
FinCEN has announced that it will begin enforcing these rules immediately, so all gift card merchants are being notified this week, though to be honest with you we have evaluated all clients in our database and don't believe any single one would have broached these new rules at any time since inception. Nevertheless we feel inclined to ensure
everyone is apprised of the newly implemented rules.
All merchants who issue their own gift cards (either directly or through a third-party vendor) and merchants who sell or reload other company's gift cards are impacted by the rules. This would include closed-loop gift cards that we are involved with as well as "open loop" prepaid gift cards as you might see in a mall or grocery store being sold with the ATM network and/or Visa or MasterCard or American Express logo's, of which Secure Payment Systems is not currently involved in.
Your primary obligations are the following to be exempt from FinCEN SAR reporting:
- You may not load more than $2,000 of value onto a single prepaid gift card in any given day.
- You may not load more than $10,000 of value onto multiple prepaid gift cards for a single consumer in any given day.
- You may not load value onto a card causing the sum of (a) the beginning card daily balance and (b) all balance increases of that same day for that same card to exceed $2,000
To reiterate, we've not encountered any transactions like this in our history, but to be honest there is no way for us to determine that item # 2 has ever been breached (given we do not see consumer identification during a gift card purchase), other than to note that historically we've never seen $10,000 activated or increased in any one day from any one location.
Note (1): If you do not already have an activation or balance increase daily limit set that is lower than the $2,000 value we will implement that change effective immediately per location and issue a response of "Exceeds Load Max" to the terminal or retail POS system if the exception is triggered.
Note (2): If item # 2 above applies to your location then it is your responsibility to follow the new reporting requirements associated with the anti-money laundering regulation. In summary, you will need to collect demographic information from the customer, the card number being issued, as well as transactional information on a downloadable SAR 109 (Suspicious Activity Report: http://fincen.gov/forms/files/fin109_sarmsb.pdf) document issued by the U.S. Treasury Department and to be remitted directly to FinCEN.
Note (3): In order to comply with item 3 above we will implement that change effective immediately per location and issue a response of "Exceeds Load Max" to the terminal or POS system if the exception is triggered.
Though the primary focus of the new ruling is to regulate "open-loop" network branded prepaid cards such as prepaid ATM cards and prepaid Visa/MC/Amex cards, the traditional "closed loop" retail cards were also ensnared to some degree despite the very limited number of transactions that might actually breach these new rules.
If you have specific questions you may contact FinCEN's regulatory helpline at 1.800.949.2732., or if you are interested, the entire ruling can be found at http://www.gpo.gov/fdsys/pkg/FR-2011-07-29/pdf/2011-19116.pdf.
Secure Payment Systems