On March 21, 2016, the FDIC, Federal Reserve Board, National Credit Union Administration, OCC and Financial Crimes Enforcement Network issued guidance for certain banks, savings associations, credit unions and US branches and agencies of foreign banks (collectively, "banks") clarifying the applicability of the customer identification program (CIP) regulations implementing Section 326 of the USA PATRIOT Act to prepaid cards.
According to the guidance, a bank's CIP should apply to the holders of certain prepaid cards issued by the institution as well as to holders of such cards purchased from third-party program managers that design, manage and operate prepaid card programs on the bank's behalf. The guidance clarifies when, under the CIP rule, the bank should obtain information in order to verify the identity of the cardholder, including obtaining the name, date of birth, address and identification number (e.g., the Taxpayer Identification Number) of the cardholder.
Since prepaid cards have become mainstream financial products, US regulators have emphasized the implementation of strong and effective controls to mitigate money laundering and other financial crime risks associated with the issuance of prepaid cards and the processing of prepaid card transactions. Some controls have already been put in place, including limits on card value and the frequency and number of transfers permitted, as well as due diligence on third parties and cardholders.
The interagency guidance is available at: http://www.occ.gov/news-issuances/bulletins/2016/bulletin-2016-10a.pdf. OCC Bulletin 2016-10 describing the interagency guidance is available at: http://www.occ.gov/news issuances/bulletins/2016/bulletin-2016-10.html .
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