Retailers Issuing Gift Cards and/or Selling Other
Companies’ Gift Card or Prepaid Cards Impacted
New anti-money laundering regulations that directly impact retail businesses that issue or sell gift cards or other prepaid cards have recently been released. These new regulations, known as the prepaid access “Final Rule,” currently effective on September 27, 2011, were issued by the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) and require the collection and verification of customer information when certain prepaid cards are sold or reloaded. Retailers issuing their own closed loop gift cards, or selling and reloading other companies’ open and/or closed loop gift cards may be significantly impacted by the new Final Rule. (Print-Friendly Version)
I. RETAILERS THAT ISSUE THEIR OWN “CLOSED LOOP” GIFT CARDS
Many retailers now issue (either directly or through a gift card company) their own gift cards useable solely to buy goods or services at their own locations. Such programs have in the past been deemed low risk. However, the new Final Rule may impact such programs depending on how such gift cards are sold and structured.
What is Closed Loop Prepaid Access?
Under the new Final Rule, “closed loop prepaid access,” is defined as “[p]repaid access to funds or the value of funds that can be used only for goods or services in transactions involving a defined merchant or location (or set of locations).” The definition includes gift cards that provide access to a specific retailer, affiliated retailers, or retail chain, or alternatively, a designated locale, such as a college campus, or a subway system.