CONFERENCE OF WESTERN ATTORNEYS GENERAL |
SANTA MONICA CA
Preventing Transactional Crime:
Visa’s role as a payment network
Alex Miller, Associate General Counsel,
Visa Inc.
CWAG | January 31, 2013
The Visa Inc. Organization
Visa is a global payments technology company that
connects consumers, businesses, banks and governments
enabling them to use digital currency and leave cash and
checks behind
• Global public company (NYSE: V)
• Headquartered in San Francisco
– Major US operations in Ashburn, VA; Denver, CO; Miami,
FL; and Foster City CA
– ~8,500 employees worldwide
• Visa Inc.’s “clients” are issuing/acquiring financial institutions
and indirectly, their cardholder and merchant customers
• Visa Inc. derives revenue primarily from fees paid by
financial institution clients; fees based on volume,
transactions and other services provided
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Visa’s Role: A Payments Network
Issuing Banks
• Issue cards
• Assume cardholder’s
credit risk
• Set and collect card
fees and interest rates
• Provide customer
service for consumers
• Provides processing
and operational systems
• Sets standards and
rules for financial
institution clients
Acquiring Banks
• Sign up retailers
• Provide processing
• Develops products
- Manage authorization,
capture and settlement
• Provides risk
management
• Generate recurring
reports/statements
• Builds and manages
global brand
• Provide customer service
for retailers
• Develops new
market opportunities
(acceptance)
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Visa is Not…
NOT just a “credit card company”
We process transactions across a variety of products. In fact, for
the four quarters ended June 30, 2010, the majority of global
payments transactions on Visa’s network were on debit products.
NOT an issuer
The transactions that run over our network — debit, credit, prepaid
and money transfers — are on products issued by our financial
institution clients directly to cardholders.
NOT a bank or lender
Visa does not issue cards, set cardholder rates, extend credit or send
solicitations to consumers. Card rates, fees and cardholder
relationships are exclusively the responsibility of the issuing financial
institution.
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Visa’s Multi-layered Compliance
Approach
Visa has a multi-layered compliance and control
framework that encompasses four key areas:
1| Visa adheres to the USA PATRIOT Act
2| Visa requires AML Programs of Clients
3| Visa conducts Due Diligence on Clients
4| New payment products / innovations:
− Visa Prepaid Program Controls
CWAG | January 31, 2013
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Closed-Loop vs. Open-Loop Prepaid
Cards
Two basic types of prepaid cards are available. The main
difference is where and how the card can be used
Closed-Loop
•
•
•
•
Issued by a single merchant
Financial Institution is not involved (no BSA, AML requirements required today)
Non-personalized, pre-denominated dollar amount
Value associated with card is only redeemable at retailer for goods or services they
sell (POS only, no cash access)
• Tend to be non-reloadable and gift cards
Open-Loop
• Also known in the industry as Network Branded prepaid cards display the logo of
the brand (e.g. AMEX, Discover, MasterCard and Visa)
• Issued by highly regulated Financial Institutions (BSA requirements, OFAC, AML,
etc.)
• Can be used at multiple merchant locations, generally wherever network brand
is accepted
• Various types of prepaid products and based on the type offer POS and/or cash
access
• May be non-reloadable or reloadable; personalized or non-personalized
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Types of Visa Prepaid Products
Unlike closed-loop cards, Visa branded cards consist of
various types of products with different value propositions,
benefits, and functionalities
Prepaid Products by Funding Source
CONSUMER
• General Purpose
• Gift
• Travel
• Parents of Youth/Teens
• Cross Border Remittance
CORPORATE
• Payroll
• Incentive / Rebate / Loyalty
• Commercial Spend
• Employee Benefits
• Health: FSA, HRA, HSA
• Insurance Claims
• Worker’s Compensation
GOVERNMENT
• Child Support
• Unemployment
• Social Security
• Tax Refunds
• Disaster Relief
*FSA (Flexible Spending Account), HRA (Healthcare Reimbursement Arrangement), HSA (Healthcare Savings Account)
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Visa Prepaid Cards Are Issued
by Financial Institutions
• All Visa prepaid cards issued in the U.S. are issued by banks, all U.S. banks
are subject to the Bank Secrecy Act (“BSA”), and all U.S. banks are
examined by federal and/or state banking agencies for compliance with the
BSA.
• Unlike stored value card products, no funds are actually stored on the cards.
Rather, like debit cards, which are exempted from FinCEN’s proposed rule
on cross-border reporting requirements,1 all funds associated with Visa
prepaid cards are held in accounts or subaccounts at the issuing bank, 76
Fed. Reg. 64,049 (Oct. 17, 2011).
• All Visa prepaid cards are structured so that the underlying funds are treated
as “deposits” for purposes of Federal Deposit Insurance Corporation
(“FDIC”) deposit insurance. To secure this deposit insurance coverage,
issuing banks are required to collect identification information on the owner
of the funds.
• Regardless of whether an issuing bank holds the underlying prepaid funds in
an “account” or in a “subaccount,” the issuing bank is obligated to know its
customer. Therefore, there is no customer anonymity with respect to prepaid
cards if those cards can be reloaded or used for access to cash.
1
76 Fed. Reg. 64,049 (Oct. 17, 2011).
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4| Visa Prepaid Program Controls
Global Prepaid Controls and Rules
• Registration – Financial Institutions must submit and obtain approval
for all Visa prepaid programs via a PIF (prepaid information form)
• Load Limit - $1,000 maximum if cardholder is not known or has not
passed KYC
• KYC – Required for cash access and reloads*; Otherwise only good for
purchases
• Cross-Border Access – Restricted on majority of U.S. non-reloadable
cards (and therefore only usable within country of issuance)
• Reselling Cards- Visa does not allow cards to be resold (e.g. websites)
• Unique BINs & Product Identifiers – Ability to report and monitor by
product type (gift, general purpose, government, etc.)
Onsite Reviews – U.S. Prepaid Issuer Risk Program
• Since 2006, Visa conducts onsite/offsite reviews to ensure FIs have
appropriate controls in place with their third-party agents (e.g. program
managers)
* Exceptions exist and are allowed where local country laws differ;
Variance for reloads without KYC have been allowed in the transit segment but cash and cross-border access is restricted
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U.S. Issued Visa Prepaid Card Statistics
International Cash Access / Usage
Statistics are inclusive of all Visa prepaid cards including Visa TravelMoney
that is designed for travel
98.64% of total prepaid volume (POS & Cash) takes place in the
U.S.
97.92% of all total prepaid cash volume takes place in the U.S.
CY 2012, the top four countries where cash was accessed from
U.S. issued prepaid cards: Mexico, Puerto Rico, Russia, United
Kingdom
− 65% of the cash usage in Mexico and Puerto Rico is initiated
by government disbursement prepaid cards
CY 2009-2011 trends show that cash access by U.S. issued cards
used outside of the U.S. has stayed relatively flat (-1%), as
volume of cards has increased approx. 15% (CAGR)
CWAG | January 31, 2013
Source: VisaNet, CY2012 ; US territories included as International volume
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Continued Efforts
• Since 2009, Visa has met with various law enforcement
groups within Department of Homeland Security (ICE,
Border Patrol, etc.) to understand law enforcements
questions and concerns regarding prepaid cards
• Early 2012, Visa issued first law enforcement
newsletter about prepaid cards. Working in conjunction
with ICE to develop training for field agents
• Regular dialogue between law enforcement and
industry is critical to ensure products are not being
misused and appropriate level of regulation is in place
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