The Prepaid Press - April 15, 2008 - (Page 6)

PREPAID BUSINESS April 15 · 2008 - 6 REGULATORY RUNDOWN by Ed Maldonado 2008 First Quarter Mobile Update 1. U.S. State Department Report: Mobile Payments, a Growing Threat 2. Congressional Bills Propose Consumer Protection On Wireless Carrier Contracts 3. FCC Report On Local Telephone Competition – CLECs & Mobile Gain Some Ground 4. FCC Spectrum Auction – And the Winners Are…. the conveyor or recipient phone is destroyed, it may be impossible to reconstruct or determine the information that was on the phone. If both a mobile phone service and the funds used to facilitate m-payments are prepaid, the service provider may not fully identify its customers due to the absence of credit risk. The problems could be compounded by the use of false identification to obtain subscriber status or to purchase or rent m-payment services. Using prepaid cellular phones could allow criminals to buy handsets incognito and use their minutes without leaving a trace of their calling records.” The report also listed the major money laundering countries for 2008. All Money Service Businesses (MSB), stored value and m-payment providers should be mindful of these countries when monitoring their Suspicious Activity Reports to report to FinCen. These countries are: Afghanistan, Antigua and Barbuda, Australia, Austria, Bahamas, Belize, Brazil, Burma, Cambodia, Canada, Cayman Islands, China, Colombia, Costa Rica, Cyprus, Dominican Republic, France, Germany, Greece, Guatemala, Guernsey, Haiti, Hong Kong, India, Indonesia, Iran, Isle of Man, Israel, Italy, Japan, Jersey, Kenya, Latvia, Lebanon, Liechtenstein, Luxembourg, Macau, Mexico, Netherlands, Nigeria, Pakistan, Panama, Paraguay, Philippines, Russia, Singapore, Spain, Switzerland, Taiwan, Thailand, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, and Venezuela. The report has application to prepaid cellular phone providers and m-payment providers alike. The full report is found at http://www.state. gov/p/inl/rls/nrcrpt/2008/vol2/html/101346. htm 1. U.S. State Department Report: Mobile Payments, a Growing Threat WASHINGTON, DC (March 1, 2008) The U.S. Department of State released its 2008 Report on Money Laundering and Financial Crimes, which included a major section identifying mobile payments as a growing threat to current anti-money laundering mechanisms and efforts. The report itself is legislatively mandated as a part of the State Department’s annual International Narcotics Control Strategy Report. It is based upon information and contributions from multiple federal agencies and international sources, principal of these being the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). Entitled “Mobile Payments – A Growing Threat,” the report details the concerns of law enforcement agencies regarding the growth of cellular phones worldwide and the potential abuse of m-payment systems. Particularly, mpayments that constitute point of sale payments made through a mobile device such as a cellular phone, a smart phone, or a personal digital assistant (PDA). The report cites that at present “there are fewer than one billion bank accounts, but approximately three billion cell phones” and that in “developing countries and often cash based societies in South Asia, Latin America, and Africa, mobile communications proliferate, leapfrogging old landline technology.” The result is that anti-money laundering efforts must now address a new dimension and hurdle when tracing illicit money flows and transactions – a lack of verifiable evidence. In large part, the report attributes this to most mpayment networks having security features that hinder law enforcement and intelligence services in their efforts to detect suspect transactions. This increases the difficulty in law enforcements efforts to “follow-the-money” when criminals use m-payment systems. The lack of clear and enforceable regulation over m-payments, and services classed as “new payment methods” (or NPMs), was also cited. This is a term the report uses for services that embody concepts of “e-money” or “digital cash” in both open and closed loop formats. Such NPMs include Internet payment services, prepaid calling and credit cards, digital precious metals, electronic purses, and mobile payments (or m-payments) that have been driven by the “convergence of the financial and telecommunications sectors.” The report concludes that the United States has few safeguards against abuse of m-payments and other NPMs. Technically m-payment service providers in the United States are classified as money service businesses and must register with the Financial Crimes Enforcement Network (FinCEN) and state agencies. However, the report cites that few actually comply with registration requirements and there is little enforcement of the regulations at the present time. The problem is further compounded for law enforcement by a lack of financial intelligence on most forms of NPMs, including m-payments, and limited expertise in m-payment methodologies and technology. These agencies also lack specific codified authority to examine abuses in the communications systems and financial transactions simultaneously. The report cites that this often handicaps law enforcement investigations, as there may not be any cash or cash equivalents to monitor or seize in connection with the user device or the user. For example: “If value is transferred electronically and The result is that anti-money laundering efforts must now address a new dimension and hurdle when tracing illicit money flows and transactions – a lack of verifiable evidence. 2. Congressional Bills Propose Consumer Protection On Wireless Carrier Contracts WASHINGTON, DC (U.S. Senate – March 14, 2008) Sen. Amy Klobuchar (D-Minn.) and Jay Rockefeller (D-W.Va.) have introduced a bill requiring wireless carriers to pro-rate Early Termination Fees (ETF) and other similar charges levied on customers who prematurely terminate short-term one to two year contracts that subsidized handsets and service, and, allow consumers to cancel their contracts within 30 days without penalty. The Bill is an apparent response a recent Government Accountability Office (GAO) report that found shortcomings with how the Federal Communications Commission processes consumer complaints. Included in these complaints were consumer wireless ETF issues. Today, Sen. Amy Klobuchar (D-Minn.) parlayed her effort to push the bill with a letter to the chief executives of the major wireless providers, AT&T Mobility, Sprint Nextel Corp. and T-Mobile included, seeking an answer to whether they will pro-rate early termination fees as previously promised after Verizon Wireless’ decision to pro-rate ETF in 2006. The Klobuchar-Rockefeller Bill, and the substance of Senator Klobuchar’s letter, brings to the forefront concerns long voiced by wireless consumers about ETFs. “Early termination fees have been a real sore spot for consumers,’’ Klobuchar said. “Too often, consumers find out only after committing to a multi-year contract that their wireless service doesn’t meet their needs.’’ The reaction of Congress to such consumer concerns is becoming patently clear. The question is one of structure and policy direction. Previously, Senator Mark Pryor (D-Ark.) http://www.state.gov/p/inl/rls/nrcrpt/2008/vol2/html/101346.htm http://www.state.gov/p/inl/rls/nrcrpt/2008/vol2/html/101346.htm http://www.state.gov/p/inl/rls/nrcrpt/2008/vol2/html/101346.htm http://www.allstateprinting.com http://www.allstateprinting.com

Table of Contents Feed for the Digital Edition of The Prepaid Press - April 15, 2008

The Prepaid Press - April 15, 2008 Motorola to Split Mobile Payments: The Saga Continues Contents The Retske Report: Election Year and Woody Hayes Regulatory Rundown: 2008 First Quarter Mobile Update 5 Minutes with Mark Herrington tppEXPO’08 Spotlight New Handsets Announced at CTIA Prepaid Wireless in Brief Prepaid Wireless Roundup Virgin Mobile Reports Earnings of 6 Cents Movida Files Chapter 11 LiveWire Mobile Acquires Groove Mobile Boost Selects Vesta for Transactions RadioShack to Offer Trumpet Mobile Service Virgin Offers New Pay as You Go Plans Book Review: Webster’s New World Telecom Dictionary Management Changes at IDT Spot Rates Calling Cards in Brief The State of Prepaid Technology: Productive Coexistence FTC Asks Court to Halt Prepaid Calling Card Scam Louisiana Community Mulls Tax on Prepaid Cards Pactolus Wins VON Magazine Award iBasis Lowers Pakistan Rate for Pingo The Legal Line Biometric Update: Keep Your Shirt On AccountNow Ends Upfront Fees Evolution Benefits Acquires SmartFlex Payments in Brief NetSpend to Offer Bill Payment and Top-up Union Bank Introduces Contactless Card Ingenico Announces Development Kit Prepaid 101: Stupid Card Tricks PLS Offering Walk-In Bill Payment Spend Gift Cards ASAP Credit Card Breach at Hannaford Bros. NACS Withdraws Opposition to Tobacco Bill Study Finds Gift Card Packaging Increases Sales NACS Names International VP Inflatable Display Provides Inexpensive Signage Retail Focus in Brief Our Advertisers Contact Us

The Prepaid Press - April 15, 2008

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