Board of Governors of the Federal Reserve

Federal Deposit Insurance Corporation

National Credit Union Administration

Office of the Comptroller of the Currency

Financial Crimes Enforcement Network

Interagency Guidance to Issuing Banks on Applying Customer Identification Program

Requirements to Holders of Prepaid Cards

March 21, 2016

Page 1 o f7

The Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance 

Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the 

Comptroller of the Currency (OCC), and the U.S. Department of Treasury’s Financial Crimes 

Enforcement Network (FinCEN) (collectively, the Agencies), are publishing this guidance to

issuing banks [Fotne1

- The term “issuing bank” used in this guidance means the bank that authorizes use of the prepaid card. Usually the

issuing bank is the bank that has its name printed on the back of a prepaid card. A bank includes any commercial

bank, savings association, or credit union, and branch of a foreign bank. See 31 CFR 1010.100(d). EndofFte 1.]

on the application of the joint regulations implementing the customer

identification program (CIP) requirements set forth in Section 326 of the USA PATRIOT Act [Fotne2

- 31 USC 5318(l). EndofFte 2.]

(referred to in this guidance as the “CIP rule”) [Fotne3

- 68 Federal Register (FR) 25090 (May 9, 2003) codified at 31 CFR 1020.220 (Treasury); 12 CFR 21.21 (OCC);

12 CFR 208.62(b)(2) and 211.24(j)(2) (FRB); 12 CFR 326 (FDIC); and 12 CFR 748.2 (NCUA). EndofFte 3.]

to their prepaid cards. Prepaid cards include

those that are sold and distributed by third-party program managers, [Fotne 4

- For purposes of this guidance, a third-party program manager is a company that designs, manages and operates a

prepaid card program and contracts with a bank to issue prepaid cards under the program and to process transactions

conducted using those cards. The third-party program manager also provides customer service and card distribution

(sales). The third-party program manager may also be a “provider of prepaid access” under FinCEN’s rule. See 31

CFR 1010.100(ff)(4). However, an issuing bank’s responsibilities described in this guidance are separate from any

Bank Secrecy Act requirements that are otherwise applicable to third-party program managers, or any other party in

the prepaid payment chain. EndofFte 4.]

as well as cards that are

used to provide employee wages, healthcare, and government benefits. The guidance clarifies 

that a bank should apply its CIP to the cardholders of certain prepaid cards issued by the bank. [Fotne5

- This guidance specifically refers to prepaid cards, but also is applicable to other prepaid access products, that meet

the criteria described in this guidance. Such examples include certain prepaid access products offered through

mobile phones or Internet sites that are used to access funds. EndofFte 5.]
Page 2 of 7

Prepaid cards have become mainstream financial products, widely used by individuals, 

corporations, and other private sector entities, as well as state, federal and local governments. [Fotne6

I. Introduction

- For further information, see the 2013 Federal Reserve Payments Study, available at

https://www.frbservices.org/files/communications/pdf/research/2013 payments study summary.pdf.and the 2013

FDIC National Survey of Unbanked and Underbanked Households, available at

https://www.fdic.gov/householdsurvev/. The survey noted a year over year increase in the use of prepaid cards with

transactions focused largely on bill payment. EndofFte 6.]

General purpose prepaid cards can be used at multiple, unaffiliated merchants and can allow 

cardholders to perform a variety of functions, including those that have traditionally been 

conducted using other payment mechanisms, such as checks, debit cards tied to bank accounts,

or credit cards. [Fotne7

- By contrast, closed-loop prepaid cards, which are redeemable only at a single merchant or service provider, or a

group of affiliated merchants or service providers, are generally not issued by banks and do not establish

relationships that resemble formal banking relationships. Cardholders of closed-loop prepaid cards may only use the

prepaid card to purchase goods or services from the merchant or service provider to which the cardholder or a third

party has provided funds to load or reload the card. EndofFte 7.]

These functions include withdrawing cash at automated teller machines (ATMs),

paying bills, purchasing goods and services, and transferring funds to other cardholders and 

receiving funds transfers. Employers use prepaid cards to provide wages and other compensation 

or benefits, such as pre-tax flexible spending arrangements for healthcare expenses or dependent 

care. State, federal, and local governments use these financial products to distribute government 

benefits and tax refunds.

Prepaid cards can be purchased online and from a variety of physical locations, such as local 

bank branches, retail stores and supermarkets. A growing number of third-party program 

managers are selling prepaid cards online and at physical locations, in addition to managing 

prepaid card programs, processing transactions, and providing customer support.

Functionalities that make prepaid cards attractive to consumers also pose risks for banks that 

issue prepaid cards and process prepaid card transactions. For example, easy access to prepaid 

cards, the ability to use them anonymously, and the potential for relatively high volumes of funds 

to flow through pooled prepaid access accounts, make prepaid cards potentially vulnerable to 

criminal abuse.

The Agencies have made clear that the money laundering and other financial crime risks faced 

by banks that issue prepaid cards and process prepaid card transactions require the

implementation of strong and effective mitigating controls. [Fotne8

- See the FFIEC BSA/AML Examination Manual, “Prepaid Access-Overview” (2014), p. 227, available at

http://www.ffiec.gov/bsa aml infobase/pages manual/OLM 061.htm. EndofFte 8.]

Controls put in place by issuing

banks and the prepaid card industry, such as limits on card value and the frequency and amount 

of transfers, as well as appropriate due diligence on third parties and cardholders, have helped 

mitigate these risks. However, questions have arisen regarding the application of the CIP rule to 

prepaid cards issued by banks, including with respect to prepaid cards issued by banks under 

arrangements with third-party program managers.
Page 3 of 7

In 2003, the Agencies issued the CIP rule that requires a bank to obtain information sufficient to 

form a reasonable belief regarding the identity of each “customer” opening a new “account.” [Fotne9

II. CIP Rule Overview

- 31 CFR 1020.100(c), (a). EndofFte 9.]

The bank’s CIP must include risk-based procedures for verifying its customers’ identities to the 

extent reasonable and practicable. In particular, the CIP rule requires banks to implement a CIP 

that includes certain minimum requirements. First, a bank’s CIP must include procedures for 

opening an account that, at a minimum, must include obtaining a name, date of birth, address,

and identification number from a customer who is an individual. [Fotne10

- 31 CFR 1020.220(a)(2)(i). EndofFte 10.]

Second, a bank’s CIP must

also include identity verification procedures that describe when and how the bank will verify the

customer’s identity using documentary or non-documentary methods. [Fotne11

- 31 CFR 1020.220(a)(2)(ii). EndofFte 1.]

Finally, the CIP rule has

specific account recordkeeping and notice requirements. [Fotne12

- 31 CFR 1020.220(a)(3) and (a)(5). EndofFte 12.]

This guidance clarifies that certain prepaid cards issued by a bank should be subject to the bank’s 

CIP, including when a bank issues prepaid cards under arrangements with third-party program 

managers that sell, distribute, promote, or market the prepaid cards issued by the bank. This may 

be the only relationship that the cardholder has with the bank.

In order to determine if CIP requirements apply to purchasers of prepaid cards, the bank should 

first determine whether the issuance of a prepaid card to a purchaser results in the creation of an 

account; and if so, ascertain the identity of the bank’s customer. As discussed below, these 

determinations depend on the functionalities of the prepaid card issued.

III. Determining the Existence of an ‘Account’

An “account” is defined in the CIP rule as “a formal banking relationship established to provide 

or engage in services, dealings, or other financial transactions, including a deposit account, a 

transaction or asset account, a credit account or other extension of credit.” An account also 

includes “a relationship established to provide a safety deposit box or other safekeeping services

or to provide cash management, custodian, or trust services.” [Fotne13

- 31 CFR 1020.100 (a)(1). EndofFte 13.]

An account does not include

“products and services for which a formal banking relationship is not generally established with 

a person, such as check cashing, wire transfer, or the sale of a check or money order.” For CIP 

purposes, an account does not include any account that the bank acquires, or accounts opened, to 

participate in an employee benefit plan established under the Employee Retirement Income 

Security Act of 1974. [Fotne14

- 31 CFR 1020.100(a)(2). EndofFte 14.]
Page 4 of 7

Certain prepaid cards exhibit characteristics that are analogous to deposit accounts, such as

checking or other types of transactional accounts. [Fotne15

- General purpose prepaid cards may include features that permit the cardholder to make and receive payments or

transfers by non-card means, such as by Automated Clearing House (ACH) , wire, check, or mobile phone message,

activities that are also conducted through an account. For example, a cardholder may be able to pay a bill by logging

on to the issuing bank’s Web site and initiating an ACH payment to the biller. A cardholder also may be permitted

to make and receive payments using a prepaid card, such as through a cardholder-to-cardholder transfer, a transfer to

the cardholder’s savings account, or a transfer to another person’s transaction account at the issuing bank. If these

features could result in the reloading of the general purpose prepaid card, then the card should be treated as an

“account.” EndofFte 15.]

Some of these cards are linked to, and permit

use of, funds held by a bank, even though the funds may be managed by, or distributed through,

a third-party program manager. [Fotne16

- Generally, credit unions may only serve individuals and entities within their approved field of membership.

Therefore, the threshold question for any credit union contemplating entering into an account relationship involving

holders of prepaid cards sold and distributed by third parties is whether the customer with whom it intends to

establish the relationship is within the field of membership it is authorized to serve. EndofFte 16.]

As described below, for purposes of the CIP rule, prepaid cards

that provide a cardholder with (1) the ability to reload funds or (2) access to credit or overdraft 

features should be treated as accounts.

a. General Purpose Prepaid Cards With the Ability to Reload Funds

General purpose prepaid cards may be reloaded by the cardholder or another party on behalf of 

the cardholder in a manner that is similar to the way in which funds can be added to a traditional 

deposit, asset, or transaction account. Therefore, the Agencies believe that issuing a general 

purpose prepaid card with those features creates a formal banking relationship and is equivalent 

to opening an account for purposes of the CIP rule.

By contrast, the issuance of a general purpose prepaid card that, under the program’s terms, 

cannot be reloaded by a cardholder or another party on behalf of the cardholder, does not 

establish an account for CIP purposes. These cards do not bear the characteristics of a typical 

deposit, transaction, or asset account because they do not permit the cardholder or other party on 

behalf of the cardholder to reload funds. Therefore, the Agencies believe these cards do not 

create a formal banking relationship.

b. General Purpose Prepaid Cards With Access to Credit or Overdraft Features

General purpose prepaid cards may permit withdrawals in excess of the card balance and also 

may provide the cardholder with access to an overdraft line or an established line of credit 

similar to a lender/borrower or credit card relationship. The Agencies believe that a card that 

permits either functionality constitutes a formal banking relationship with the issuing bank and is 

an account for purposes of the CIP rule.

c. Activation of General Purpose Cards

In some cases, general purpose prepaid cards may be sold without the reloadable functionalities 

activated or credit or overdraft features enabled. A purchaser or subsequent transferee of these 

cards generally may activate any one of those features only if they contact the issuing bank or the
Page 5 of 7

third-party program manager. In such cases, for purposes of the CIP rule, the Agencies believe 

that an account is not established until a reload, credit, or overdraft feature is activated by 

cardholder registration.

IV. Identifying the Customer

Once an account has been established, the bank must identify the customer for purposes of the

CIP rule. Under the CIP rule, a person that opens a new account is deemed a customer. [Fotne17

- 31 CFR 1020.100(c)(1)(i). EndofFte 17.]

To

verify the identity of the person opening the account, the final CIP rule’s preamble explains that

a bank need only verify the identity of the named accountholder. [Fotne18

- 68 FR 25090, 25094 (May 9, 2003). EndofFte 18.]

The following describes how

these principles should apply to different types of prepaid cards.

a. Prepaid Cardholders and Third Parties

When a general purpose prepaid card issued by a bank allows the cardholder to conduct 

transactions evidencing a formal banking relationship, such as by adding monetary value or 

accessing credit, the cardholder should be considered to have established an account with the 

bank for purposes of the CIP rule. Further, the cardholder should be treated as the bank’s 

customer for purposes of the CIP rule, even if the cardholder is not the named accountholder, but 

has obtained the card from an intermediary who uses a pooled account with the bank to fund 

bank-issued cards.

As a general matter, third-party program managers should be treated as agents of the bank for 

purposes of the CIP rule, rather than as the bank’s customer. The preamble to the final CIP rule 

makes clear that the rule does not affect a bank’s authority to contract for services to be 

performed by a third party either on or off the bank’s premises, nor does it alter a bank’s 

authority to use an agent to perform services on its behalf. However, as with any other activity 

performed on behalf of the bank, the bank ultimately is responsible for compliance with the 

requirements of the bank’s CIP rule as performed by that agent or other contracted third party. [Fotne19

- See 68 FR 25090, 25104 (May 9, 2003). See also Interagency Interpretive Guidance on Customer Identification

Program Requirements under Section 326 o f the USA PATRIOT Act, FAQs Final CIP Rule (April 28, 2005), at p. 5,

available at http ://www.fincen. gov/statutes re gs/guidance/pdf/faqsfinalciprule .pdf. EndofFte 19.]

Third-party program managers may establish pooled accounts in their names for the purpose of 

holding funds “on behalf of’ or “in trust for” cardholders or processing transactions on behalf of 

other issuing banks. However, the fact that these funds are held in a pooled account should not 

affect the status of the cardholder as a bank customer, assuming the cardholder has established an 

account with the bank by activating the reloadable functionalities of a general purpose prepaid 

card, or its credit or overdraft features.

In the case of non-reloadable general purpose prepaid cards without credit or overdraft features, 

or other prepaid cards that do not have the identified features that establish an account for 

purposes of the CIP rule, such as closed-loop prepaid cards, the third-party program manager in
Page 6 of 7

whose name the pooled account has been established should be considered to be the only 

customer of the issuing bank and should be subject to requirements of the bank’s CIP policies 

and procedures. In these cases, the issuing bank need not “look through” the pooled account to 

verify the identity of each cardholder.

i. Payroll Cards

Payroll cards are cards that enable an employee to access funds in accounts that are established 

directly or indirectly by an employer and to which the employer (or a third party acting on the 

employer’s behalf ) is able to transfer the employee’s wages, salary, bonuses, travel 

reimbursements, or other compensation. Typically, the employer (or the employer’s agent) opens 

an account with a bank and provides each of its employees with a card that can be used to access 

the employee’s share of the account. The employer (or the employer’s agent) then transfers the 

employee’s wages, salaries, or other compensation into the account or subaccount, rather than 

distributing a check to the employee.

If the employer (or the employer’s agent) is the only person that may deposit funds into the 

payroll card account, the employer should be considered the bank’s customer for purposes of the 

CIP rule. In that case, the bank need not apply its CIP to each employee. The employer should be 

considered to be the customer even if there are subaccounts that are attributable to each 

employee. By contrast, if the employee is permitted to access credit through the card, or reload 

the payroll card account from sources other than the employer, the employee should be the 

customer of the bank and the bank should apply its CIP to the employee.

ii. Government Benefit Cards

Government benefit cards (also referred to as Electronic Benefit Transfer Cards) are cards issued 

under government benefit programs to distribute government benefits or other payments. 

Government benefit programs vary as to whether beneficiary-cardholders are permitted to load 

funds unconnected to the government benefit program onto the card, and whether they provide 

access to credit. If the government benefits card program permits only government funds to be 

loaded onto the card and does not provide access to credit, no customer relationship is 

established between the bank and the beneficiary-cardholder for purposes of the CIP rule. In 

addition, since the term “customer” does not include a department or agency of the United 

States, of any state, or any political subdivision of any state, a bank that issues such a 

government benefit card is not required to apply its CIP to the government agency establishing 

the benefit card account. If, however, the card allows non-government funds to be loaded onto 

the card or provides access to credit, then a customer relationship is established between the bank 

and the beneficiary-cardholder and the bank should collect CIP information from the beneficiarycardholder.

iii. Health Benefit Cards

Prepaid cards can also be used to access funds in a Health Savings Account (HSA), or accounts 

established as part of a Flexible Spending Arrangement (FSA) or Health Reimbursement 

Arrangement (HRA). While HSAs, FSAs, and HRAs are all used to set aside tax-exempt funds
Page 7 of 7

for certain medical expenses, these arrangements may differ with respect to who may establish 

the account, deposit funds into the account, or access funds in the account. Therefore, the person 

or entity that should be considered to be the issuing bank’s customer for CIP purposes will differ.

Health Savings Accounts are accounts established by an employee to pay or obtain 

reimbursement for qualifying medical expenses. Such reimbursement may be issued on a 

prepaid card. The employee establishing the account or the employer may contribute to 

the HSA. Because the employee establishes the account, the employee is the issuing 

bank’s customer for purposes of the CIP rule.

Flexible Spending Arrangements and Health Reimbursement Arrangements are

established by an employer and funded by either voluntary withholdings from an 

employee’s salary (in the case of FSAs only) or through direct employer contributions (in 

the case of FSAs and HRAs). The employee may use a debit card, credit card, or prepaid 

card for certain qualified medical expenses. Because no person other than the employer 

(or employer’s agent) establishes an FSA or HRA, makes deposits into the FSA or HRA, 

and distributes funds from the FSA or HRA, the employer should be the issuing bank’s 

customer for purposes of the CIP rule.

V. Contracts with Third-Party Program Managers

The issuing bank should enter into well-constructed, enforceable contracts with third-party 

program managers that clearly define the expectations, duties, rights, and obligations of each

party in a manner consistent with this guidance. [Fotne20

- For further information, see FFIEC Information Technology Examination Handbook, “Outsourcing Technology

Booklet,” available at http://ithandbook.ffiec.gov/it-booklets/outsourcing-technology-services.aspx. Other guidance

issued by the Agencies may also be applicable. EndofFte 20.]

For example, a binding contract or agreement

should, at a minimum:

a. outline CIP obligations of the parties;

b. ensure the right of the issuing bank to transfer, store, or otherwise obtain immediate 

access to all CIP information collected by the third-party program manager on 

cardholders;

c. provide for the issuing bank’s right to audit the third-party program manager and to 

monitor its performance (generally, banks need to ensure that periodic independent 

internal and external audits are conducted to ensure prudent operations and compliance 

with applicable laws and regulations); and

d. if applicable, indicate that, pursuant to the Bank Service Company Act (BSCA) or other 

appropriate legal authority, the relevant regulatory body has the right to examine the 

third-party program manager. [Fotne21

- For example see, OCC Bulletin 2011-27, “Pre-Paid Access Programs: Risk Management Guidance and Sound

Practices” (June 28, 2011). The BSCA does not confer authority to the NCUA. However, federally insured credit

unions may refer to Letter to Credit Unions 07-CU-13 and associated enclosures for relevant guidance in addition to

the FFIEC Information Technology Examination Handbook. EndofFte 21.]