Further Regulations set up for Prepaid Stored-value Cards
Chinese authorities have long been concerned about the impact of corruption and corrupt officials on Chinese society. Corruption in China is manifested in a variety of forms and usually involves other illegal behavior such as money laundry, pilfering of public funds, organized crime and tax evasion. One of the methods used by officials to receive money illicitly involves single purpose stored-value cards (SVCs) and debit cards already containing cash value which can be used to make purchases or redeem for cash.
New regulations issued on November 23, 2011 to solicit public response are aimed at tackling the use of SVCs for corrupt purposes. The draft regulations are the most recent in a series of circulars issued in May and August 2011. These regulations focus on registration of SVCs by SVC issuers.
The draft regulations differentiate between anonymous SVCs (which do not require users to register their personal data) and those which do require registration. The obligation to register falls on issuers.
The stored-value amount limit for anonymous cards is RMB 1,000 while the upper limit for registered cards is RMB 5,000. Furthermore, SVCs with a stored-value limit of RMB 10,000 or more can only be issued after registering the user’s identity (ie: the personal name, for individuals, and the corporate name for business entities). Issuers are required to confirm and maintain records of these details for every card issued. If promulgated in their current form, the draft regulations will impose a penalty of RMB 10,000 to RMB 30,000 for issuing cards without registering or maintain records of these details.
If promulgated in their current form, the draft regulations will impose a penalty of RMB 10,000 to RMB 30,000 for issuing cards without registering or maintain records of these details.
The draft regulations may help to limit the abuse of SVCs for corruption and money laundering in China but countless other methods remain. Foreign investors in the business of issuing branded SVCs for promotional and other purposes may directly encounter these regulations – if they are made law. Otherwise, the most likely scenario will be in the context of giving SVCs as gifts.