APR 9 2012

James H. Freis, Jr.Director

Financial Crimes Enforcement Network

Post Office Box 3

Vienna, Virginia 22183

Dear Director Freis:

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Homeland Security InvestigationsOffice ofthe Executive Associate Director

U.S. Department of Homeland Security500 12th Street, SW

Washington, D.C. 20536

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We are pleased to offer comments to Notice of Proposed Rule Making (NPRM) RIN 1506-AB13 which proposes expanding the definition of monetary instruments, for the purposes ofcross-border reporting, to include tangible prepaid access devices. As you well know, we havebeen vocal proponents of this proposed rule and we therefore commend the U.S. Department ofthe Treasury, Financial Crimes Enforcement Network (FinCEN) for putting this NPRM forward.As the nation's lead border law enforcement investigative agency, staying on pace withtechnology and the dynamic developments in the delivery of financial services is of the upmostimportance. This rule recognizes that these products in fact represent the evolution of otherreportable prepaid monetary instruments like money orders and travelers checks.

The designation of tangible prepaid access devices as cross-border reportable monetaryinstruments will be incorporated into existing enforcement processes in a seamless manner. Aswith other important changes to entry requirements, U.S. Immigration and CustomsEnforcement's (ICE) Homeland Security Investigations (HSI) will work with our partners at U.S.Customs and Border Protection (CBP) to ensure that the traveling public is provided thenecessary information to make an accurate declaration of the amount of cash and monetaryinstruments that they are bringing into or taking out of the U.S. Now to address the questionsposed in the NPRM:

A. Obstacles to law enforcement

Over the last year, HSI has been working with the Department of Homeland Security, Science &Technology (DHS S&T) Directorate, to develop a handheld reader with features that will, amongother things, allow law enforcement to quickly and accurately differentiate between a travelersdebit, credit and prepaid products. This reader, which is in an advanced stage of development,will enhance our ability to enforce the Currency and Monetary Instrument Reporting (CMIR)

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ICE HSI Response to FinCEN Cross Border NPRMPage 2 of4

requirement with respect to prepaid access devices in a manner which imposes minimal to noinconvenience to individuals and complies with U.S. laws, regulations, and procedures.

Although the delivery mechanisms (e.g., prepaid cards, cell phones, etc.) of monetaryinstruments may be evolving, the concept of a device or document that consumers can use toaccess value is not new. HSI and CBP have over 40 years of experience enforcing the CMIRrequirements. The challenges outlined in FinCEN's question mirror the challenges that HSI andCBP have faced with regard to other monetary instruments such as bearer negotiable checks,money orders and traveler's checks, among others. HSI has developed interdiction andinvestigative techniques to address these challenges.

CBP officers and HSI Special Agents deal with both intentional and unintentional falsedeclarations on a daily basis. The penalty structure that is already in place takes the totality ofthecircumstances into account to ensure that when penalties are employed they are measured andproportional.

B. Should closed loop cards that can be used only at specific store or merchant, or for aspecific service, and cannot be used at ATMs to access cash continue to be subject to aborder declaration obligation as proposed?

Yes, it is HSTs experience that the rise in the popularity of all types ofprepaid cards has createda parallel market where closed loop cards can be traded for other cards or cash. Excluding thesecards from the declaration requirement will create a vulnerability that will be ripe forexploitation by criminal organizations.

a) Should other types oflower riskpre-paid access devices that are notconsideredprepaidprogramsunder thefinal rule be excludedfrom thedefinition ofmonetary instruments,such as government-funded, limited-value orpayroll cards?

HSI agrees that products such as government-funded cards should be excluded from therequirement; however, limited-value and payroll cards should not be excluded from thedefinitionofmonetary instrument. The vulnerabilities associatedwith payroll cards areexacerbated by the difficulties law enforcement faces when trying to establish the beneficialownership ofmany U.S. corporations. Excludinglimited-value and payroll cards increases thepossibility that these cards will continue to be abused. Law enforcement has alreadydocumented large scale misuse ofpayroll cardsby both sophisticated and unsophisticatedcriminal organizations.

C. Should branded open loop reloadable prepaid cards with the name of the person towhom the card has been issued embossed on the front of the card be subject to borderdeclaration as monetary' instruments?

Yes, HSI believes that reloadable prepaid cards with a name embossed on the front of the cardshould be subject to borderdeclaration as a monetary instrument. The features of prepaidcardsthat make them vulnerable to abuse by criminalelementshave nothing to do with whether a card

ICE HSI Response to FinCEN Cross Border NPRMPage 3 of4

has a name embossed on it or not. Prepaid card customers undergo a simplified know yourcustomer/customer due diligence process, which is conducted by the prepaid card programmanager, not a financial institution. In most instances the financial institution will not beinvolved in the verification of information provided by the customer or store this information intheir servers since these cards are tied to pooled bank accounts and not traditional depositoryaccounts. There is no question that a financial institution's relationship with, and obligations to,prepaid customers are significantly and substantially different from those they have withtraditional customers.

D. Should the border declaration obligation be associated with the value immediatelyavailable to a prepaid access device at the time the device enters or leave the country orshould the declaration obligation apply to the potential maximum value available via theprepaid access device?

HSI believes that the border declaration requirement should apply to the value immediatelyavailable to a prepaid access device at the time the device enters or leaves the country. This isconsistent with the way the regulations currently are applied to existing monetary instruments.This is also within the capabilities of our proposed technical solution.

£. Should the border declaration apply to codes, passwords and other intangibles as well asto any tangible object that is dedicated to accessing prepaid funds?

HSI believes that border declaration should not apply to codes, passwords and other intangibles.Identification and verification of intangibles in the context of border enforcement poses logisticaland potential legal issues that are not contemplated by currency and monetary instrumentdeclaration regulations. The structure of the currency and monetary instruments declarationregime, hinges on the existence of a physical object. The language requires something that canbe passed from one individual to another in order to be presented to a third party forexecution/payment.

a) Shouldit only apply to cards or also to cellphones, keyfobs, or other tangible objectsthat include a device that enables them tofunction in a similar mannerto "swiping" amagnetic stripe card?

Border declaration should apply to cell phones, key fobs, or other tangible objects when theseobjects are associated with a prepaid account. These products represent the evolution of valuedelivery systems from cash to other forms which assure the authenticity of the value associatedwith the product, while providing increased access and personal security to the users. As withcards; the application of the border declaration requirement should be determined by the prepaidnature and liquidity of the product, rather than the delivery system.

F. Additional costs associated with the completion of the CMIR form as a result of thisproposed rule.

HSI has no comments regarding this question.

ICE HSI Response to FinCEN Cross Border NPRMPage 4 of4

G. Is it appropriate to exempt, the international transport mail or shipment by a prepaidaccess business or its agent of tangible prepaid access devices prior to their delivery to aseller for sale to the public?

Yes, HSI believes that it is appropriate to exempt the international transport mail or shipmentprior to delivery of a tangible prepaid access device to a seller for sale to the public; this isconsistent with the application of the existing regulation relating to the exemption for traveler'schecks and cash prior to delivery to a central bank. Prepaid cards and other tangible devices arereplacement products for cash and traveler's checks, these exemptions are based on the fact thatneither cash nor traveler's checks have any intrinsic value, the value is added by an authoritywhich then puts them into circulation. This process is analogous to tangible prepaid devices.

H. Should devices that require a PIN number for a point of sale or for ATM use beexcluded as intangible prepaid access?

HSI believes that these devices should not be excluded. Based on our investigative experience,the vulnerabilities of these cards have more to do with the amount and reliability of customerinformation collected by program managers, as well as with the liquidity of the products, thanthe manner in which a device is able to access funds via ATMs.

HSI reiterates its support for this NPRM and looks forward to working with FinCEN, CBP andthe financial industry to develop an enforcement strategy that will strike a balance betweennational security and the delivery of important services to millions of people that utilize prepaidaccess devices for a wide variety of legitimate purposes.

Sincerely,

James A. Dinkins

Executive Associate Director

Homeland Security Investigations