Proposed amendments to German anti-money laundering rules could wipe out the market for prepaid cash cards in the country, a lobbying group said.
The government plans legislation that would require prepaid card sellers to identify each purchaser and retain that information. The administrative burden would be too much for the kiosks, gas stations and supermarkets that are the main sellers of such cards, and kill the market, Prepaid Forum Deutschland said in a statement. The group’s members include Paysafecard Group, Lekkerland AG and MasterCard Inc.
“We face the risk that a secure and practical payment method will be pushed out of the German market by rules that overshoot,” Thorsten Klein, a spokesman for MasterCard in Germany, said in an interview. “This would hit a payment tool that grants access to the e-commerce market to consumers, including those who normally won’t get a credit card.”
Prepaid card transactions are expected to reach more than $840 billion by 2017, according to a Boston Consulting Group study commissioned by MasterCard and released last year. The German prepaid card market enables transactions of about 850 million euros ($1.2 billion) a year, according to Prepaid Forum.
Germany was criticized in a 2010 report by the Financial Action Task Force, an inter-governmental body dedicated to combating money laundering and terrorist financing. The government cited the report in the preamble to its draft bill that includes the rules Prepaid Forum has criticized.
Germany’s financial regulator Bafin and the Federal Criminal Police Office’s Financial Intelligence Unit today said in a joint statement the number of suspected money-laundering cases rose 22 percent in 2011, a peak since 1993 when the rules were first introduced. About half of the cases were found to be actual crimes.
Cases involving the use of online-payment methods rose to 94 in 2011 from 63 in 2009, the agencies said. Bafin said the proposed legislation would enhanced its stepped-up efforts to stop money-laundering.
“Electronic money allows anonymous payments which don’t leave paper trails, unless the strict compliance with customer due diligence is guaranteed by the institutions,” Bafin said.
If the bill is passed by parliament, Prepaid Forum said Germany would be the only country in Europe to follow such a “radical” path. The requirements would apply to about 40,000 retailers which make about 20 million euros in profit a year selling the cards, according to the group. Money laundering could be combated by other less intrusive and more effective methods, it said.
“The proposed rules are a deterrent, also, from the consumer’s point of view,” said Klein. “As a consumer, I certainly wouldn’t want the gas station attendant to make a copy of my identity card.”
German law already regulates the prepaid industry as required by European Union rules, the Finance Ministry said in an e-mailed statement. The proposed amendments will only close a gap by including retail card sellers into that regime, it said.
MasterCard, based in New York, said in December it will acquire prepaid card-management assets from Travelex Holdings Ltd. for 290 million pounds ($458 million) to expand in one of the fastest growing segments of the charge-card market.