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Financial Outsourcing Solutions


FOS Blog

01 Apr

Interagency Prepaid Card Guidance

Interagency Prepaid Card Guidance

Consumer demand for the prepaid card has increased over the past few years due its portability, accessibility and ease of use.  For BSA purposes, financial institutions have struggled with the definition of customer for these products in regard to the CIP requirements of their BSA programs.  To assist financial institutions in understanding the customer relationship, on March 21, 2016, the joint agencies issued clarification in “Interagency Guidance to Issuing Banks on Applying Customer Identification Program Requirements to Holders of Prepaid Cards.” Now is a great time to review your BSA program and operations to ensure that it meets the standards of this guidance through:

  • Understanding your prepaid card offering. Prepaid cards include government issued cards, payroll cards, healthcare benefits, cards sold by third parties to name a few.  Features to consider include:
    • Purchase and access points for the cards
    • Reloadable versus non reloadable
    • Closed loop versus open loop
    • Credit or overdraft features
    • Fee structure
  • Determining the existence of an “account” as defined by the CIP rule. Be aware that Prepaid Cards that provide the holder with the ability to reload funds or to access credit/overdraft features should be treated as accounts for purpose of CIP.
  • Identifying the customer for each prepaid card product. Generally, a third party program manager is considered to be an agent of the Financial Institution, but in certain circumstances the third party would be considered the customer. For example:
    • Payroll cards issued by an employer. The employer would be considered the customer and subject to CIP requirements if they are solely responsible for depositing funds into the payroll card account.  But if the employee card holder can access credit/overdraft or load additional funds onto the card, the employee card holder becomes subject to CIP.
    • Government Benefits cards. Remember that any department or agency of the US, state or political subdivision that issues these prepaid cards is not subject to CIP requirements.  But, if the card permits credit access or loading of non-government benefit program funds, the individual card holder becomes subject to the Financial Institution’s CIP requirements.
    • Health Benefit Cards including HSAs and FSAs/HRAs. Generally, the entity depositing funds into the accounts is the Financial Institution’s customer and subject to CIP requirements.
  • Reviewing contracts established between the Financial Institution and Third Party Programs to ensure that:
    • Responsibility for CIP is clearly outlined;
    • The Financial Institution has the right to request and receive access to CIP information collected by the third party as its agent;
    • The Financial Institution has the right to “audit” the third party program for compliance with CIP requirements and has the ability to request access to internal and external audits that are performed on the third party program manager
    • The contract grants the Financial Institution’s regulatory body the right to examine the third party program manager for compliance.

For additional information please contact Debbi Fetter at