With prepaid products becoming more and more sophisticated, federal regulators are asking banks that offer such products to develop comprehensive risk-management policies and procedures to guard against potential fraud. In supervisory guidance issued Tuesday, the Office of the Comptroller of the Currency said it "supports national banks' participation in prepaid access programs to meet consumer needs and diversify sources of revenue."
But, the OCC said, prepaid programs expose banks to a variety of risks that increase when the programs include such features as international funds transfers, card-to-card transfers and Internet transfers — and even more so if those functions are outsourced to a third party. To protect itself and and its customers, a bank should thoroughly assess how the products fit in with its business strategy and risk appetite, and then develop written policies and procedures that are easily understood and clearly define the roles and responsibilities of various departments.
If a bank uses a third-party vendor, the OCC says that the relationship should be governed by a contract in which the vendor must agree to monitor suspicious activity and agree to periodic audits from the bank and the OCC, among other things. The OCC also said that banks must submit to boards of directors periodic progress reports so that boards can assess whether the prepaid programs are meeting their objectives.
