Compliance Includes Pre-Paid and Gift Cards

Feb 9, 2012 1:07 PM  

http://www.diamonds.net/News/NewsItem.aspx?ArticleID=38933&ArticleTitle=New+Anti-Money+Laundering+Rules+Begin+March+31+

The federal government (through FinCEN)  announced new rules that require sellers of “pre-paid access” products such as gift cards, or any other mechanism that provides access to transferable funds paid in advance, to comply with anti-money laundering rules pertaining to this activity, according to the Jewelers Vigilance Committee (JVC).  Pre-paid access also includes  such cards issued by a seller to provide credit for returns.  These rules go into effect on March 31, 2012.

JVC noted that increased use of pre-paid access products presents additional risks for money laundering and terrorist financing, according to FinCEN, the agency that issued the rules.

JVC kindly defined what these rules mean for the jewelry industry.

•Retailers that sell gift cards that can be used only in their stores OR who accept a return and issue gift cards to use in the store, in the amount of $2,000 or more, are required to take certain steps to ensure these products are not being used to launder money.

•Retailers who issue a gift card in an amount of $2,000 or less ONLY for credit and ONLY to be used for a purchase in their store do not have to comply, unless this card can be used internationally or “reloaded” remotely.

•If a gift card in the amount of $1,000 or more can be used at outside stores (another store or chain) for other items, than retailers have to comply.

•Retailers that issue any pre-paid access products to a customer in the aggregate amount of $10,000 or more in one day, have to comply.

JVC told retailers who already have an anti-money laundering program under the USA PATRIOT Act and also issue gift cards in the qualifying amounts can add the new requirements to the existing program.

Retailers who are exempt from the USA PATRIOT Act, but do issue qualifying gift cards, can use the JVC’s PACK -  USA PATRIOT Act Compliance Kit - to implement an anti-money laundering program in compliance with these new rules. 

Compliance Requirements:

FinCEN requires that retailers who must comply shall gather customer identification information, maintain records of the transactions and implement an anti-money laundering program similar to the requirements of the USA PATRIOT Act.

Those who sell these products will also be obliged to report any suspicious activity using an IRS form called a “Suspicious Activity Report.” 

Cecilia Gardner, JVC’s president, said, 'Compliance for sellers of pre-paid products is required by March 31, 2012. These new regulations are sure to engender questions and uncertainty by retailers that provide gift cards and store credits.'