Trade body calls on European Parliament and EU policy influencers to create a level playing field for online and offline payments and maintain the thresholds of the Customer Due Diligence (CDD) Exemption set out in 4AMLD
London, August 1, 2016– The Prepaid International Forum (PIF), the not-for-profit trade association representing businesses active in the prepaid sector, has published its position on the proposed amendments to 4AMLD (known as 5AMLD).
Earlier this month, the European Commission announced a series of measures to further strengthen EU rules on anti-money laundering to counter terrorism financing. 5AMLD targets a number of perceived gaps in 4AMLD. The amendments that purport to tighten controls on the use of prepaid payment instruments cause massive concern to the prepaid industry. The Commission has proposed to (i) lower the thresholds for identification in respect of non-reloadable prepaid products from €250 to €150 and (ii) suppress the CDD Exemption for the online use of prepaid products.
In its position paper, PIF argues that the proposed amendments will place an immense burden on the regulated e-money sector, specifically for online payments and regulated restricted and open loop products.
PIF also stresses that unregulated products are explicitly excluded from 5AMLD. Such products are not subject to KYC requirements or AML/CTF oversight whatsoever. This will lead to an unfair and distorted market.
Dr. Hartwig Gerhartinger, Chairman of the PIF AML Working Group said:
“PIF fully supports the regulatory goal to combat the use of prepaid products for illicit purposes as well as the evidence-driven, risk-based approach to the prevention of money laundering and terrorist financing in 4AMLD.”
“However, the European Commission’s proposal to completely suppress the CDD exemption and ask for identification from the first Euro for any online use of prepaid products, irrespective of the money laundering and terrorist financing risks related to these products, constitutes an unbalanced and disproportionate approach.”
“It places a massive burden on the regulated e-money sector for online payments and threatens the continued commercial viability of issuers of low-value, low-risk prepaid payment instruments used by millions of law-abiding customers throughout Europe.”
“The exclusion of unregulated payment products from the proposed new rules is inconsistent with the regulatory goal to combat money laundering and terrorist financing.”
The trade body’s position paper specifically calls on legislators to maintain the current thresholds of the CDD Exemption for regulated non-reloadable prepaid products.
Craig James, PIF Chairman, says:
“The proposal to lower the thresholds discriminates against issuers of low-value, low-risk regulated restricted loop and scheme-badged open loop payment products that are principally used to service the personal gift and corporate rewards markets.
Further restrictions from the already low current limit will move higher value gifting and corporate rewards to unregulated alternatives leading to an unfair and distorted market.”
PIF goes on to highlight that 5AMLD does not reflect the fact that the industry provides for much stronger capabilities to detect and halt suspicious usage behaviour in real-time for the online use of prepaid products than is the case for their offline use.
“There is no evidence indicating that the online use of prepaid products would pose an increased risk as compared to their use for offline payments.”
Nor, in the view of PIF, does 5AMLD acknowledge that firms issuing regulated e-money products are already subject to stringent controls to ensure that the products and the businesses providing them are compliant with ongoing AML/CFT monitoring and reporting requirements.
“If the proposal to establish identification requirements from the very first Euro for online use of regulated prepaid products, while exempting all unregulated payment products from any KYC requirements is adopted, there is a very real danger that customers intending to pay online will be driven to more accessible unregulated equivalents.
These unregulated products, such as closed loop payment products offered by hotel chains and car hire companies and online platforms, do pose a much higher risk of money laundering and terrorist financing because they are completely anonymous and do not provide any traceability if abused by criminals to orchestrate their activities.”
PIF is actively calling on members of the European Parliament and EU policy influencers to support its position so that competitive disadvantages for regulated firms are avoided and unnecessary obstacles for the use of low-value, low-risk non-reloadable prepaid products by millions of ordinary, law-abiding European citizens are removed.
To access the position paper click here
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