Mercator Perspectives

Misguided FinCEN AML Rule Proposal is Supported On the FRB Portal & Rails Blog Site

This is an extract of a comment I made on the Portal & Rails Web site.

Mercator research suggests that FinCEN's proposed rule changes will have a significant negative impact on the prepaid market and yet I am unable to find anyone in the prepaid industry that believes these proposed rules will prevent most of the crimes identified in this blog posting:

"To help identify potential risks related to prepaid access devices, FinCEN formed a subcommittee within their Bank Secrecy Act Advisory Group (BSAAG). The subcommittee has identified numerous risks, such as funding with cash from stolen credit cards and virtual money cards that allow individuals without a bank account to access illicit cash via ATMs globally. Some high-profile criminal activities have also surfaced, exposing some of these potential risks."
It is particularly vexing that Ana picked the Payoneer story as the example of "high-profile criminal activity" since this illegal activity is explicitly not prevented by these proposed rules since payroll cards are excluded from this FinCEN proposal.

If FinCEN were to document how these proposed rules would prevent specific criminal activities, I think it is likely the prepaid industry could prove FinCEN wrong. More importantly, if FinCEN were to work directly with the industry, I am positive more effective solutions could be identified that would cause far less disruption to the prepaid market.

Preventing disruption is important because these prepaid products are the best hope for providing low cost access to financial services for the unbanked and under served. Even as the FDIC decries the lack of affordable financial services for Low & Moderate Income families, FinCEN proposes new rules that I believe will greatly increase the cost associated with delivering financial services to that same audience –but likely with no benefit to law enforcement.

Click here to read the entire discussion.


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