Several years ago, prepaid debit cards were available that were “anonymous” as well as reloadable. The cards were popular with people concerned about their privacy. Unfortunately, they were also popular with people who used them for money laundering. As a result, more strict rules have been imposed by the Government as well as payment card networks (like Visa and MasterCard) to require cardholder identification to help eliminate the potential for using these prepaid cards in money laundering. These rules often require you to provide a social security number when opening a new account.
Today, most prepaid cards that are reloadable require you to provide your social security number as well as a physical mailing address (not a P.O. Box) when you apply for a card. A “reloadable” card is generally defined as a card that has your name embossed on the front, and that you can add more money to through direct deposit or reload networks such as the reload network operated by The Green Dot Corporation.
Why is a social security number required to get a reloadable prepaid debit card?
There are two main reasons.
First, Government Regulations require banks to perform adequate “know your customer” processing when opening new accounts.
The “Bank Secrecy Act” (or “BSA”) requires that banks and other financial institutions in the United States file currency transaction reports (CTRs) and suspicious activity reports (SARs). Collecting information, maintaining records, and filing reports enable law enforcement to conduct criminal investigations and provide regulatory agencies with the ability to monitor noncompliance.
The USA PATRIOT Act, which was passed in 2001, amended the BSA to mandate that all statutory financial institutions establish anti-money laundering (AML) programs. This mandate obligates each institution subject to it to develop, implement, and maintain an effective AML program. Through recent BSA enforcement actions, the AML program requirement has been extended to nonbank issuers, sellers and redeemers of stored-value cards (including money services businesses), and operators of credit and debit card systems.
By requiring you to provide your social security number when opening an account (as well as an actual physical address), banks and program managers can comply with these federal laws.
Second, because the banks could be liable for any illegal activity if they don’t adequately take steps to identify you when opening an account.
Payment card networks have taken steps to comply with the federal laws, and to reduce their liability by instituting rules for all issuers and program managers associated with prepaid debit cards.
The result of all these regulatory and legal issues are that you need to adequately identify yourself before you are issued a reloadable prepaid debit card. The way most issuers and programs have decided to identify you is to require that you provide your Social Security Number and address.