Banking Agencies Provide Guidance on Issuing Prepaid Cards

National banking regulators issued guidance on applying the customer identification program ("CIP") requirements of the PATRIOT Act to prepaid cards. According to the regulators, prepaid cards pose risks for the banks that issue them. Such cards are particularly vulnerable to criminal abuse because (i) they are easily accessed, (ii) they can be used anonymously and (iii) they can be used in high-volume transactions.

For that reason, the Board of Governors of the Federal Reserve System ("FRB"), the FDIC, the National Credit Union Administration, the OCC and FinCEN jointly issued the guidance.

The guidance clarifies when prepaid cards should be subject to a bank's CIP program and how the program should be applied.