Travel Cards and the Anti-Money Laundering & Countering Financing of Terrorism Act 2009

In October 2018 Alan was in Spain. As a frequent flyer Alan used a travel card service offered by the travel card company. Alan booked accommodation with a company in Toledo, Spain which was approved by the travel card company using a specific reference code. The company later reversed the transaction, but used a different code and the travel card company suspended Alan’s account on suspicion of fraud because of the different codes.

Alan was not alerted until 6 November 2018 and his account was not reinstated until 22 November 2018. During this time frame, Alan was asked on a number of occasions to provide a receipt for the transaction, but he could not do so.

Alan’s account was electronically reinstated. Alan complained to FSCL In January 2019 about the suspension of his card.

 

Dispute

Alan disputed that the 390 Euro transaction that had been credited to his account was sufficient to justify the travel card company suspending his account. Alan wanted to know why the travel card company had not contacted him to explain what had happened. Alan also complained that after he had explained that he could not produce a receipt, the travel card company should not have taken until 22 November to unblock his account.

The travel card company stated that because two different reference codes had been provided, it had no option but to suspend the account. The travel card company was subject to heavy regulations to prevent money laundering and fraud. The length of time taken to investigate was not unreasonable due to the types of inquiries that are required to be made.

The travel card company offered compensation of $250 which it thought sufficient to remedy the circumstances.

 

Review

We reviewed the travel card company’s terms of service. We found that the travel card company was entitled to suspend Alan’s account on the basis of suspected fraud. The travel card company was obliged to consider New Zealand’s anti-money laundering laws under the Anti Money Laundering and Countering Financing of Terrorism Act 2009 (the Act).

The Act targets both large and small transactions. We also noted that travel cards are frequently targeted by money launderers.  

We concluded that the freezing of the account was justified, considering the features of the transaction.

The communication delay was considered unjustifiable in the circumstances. The travel card company waited five days before contacting Alan. The company was aware of the transaction on the day it occurred. The company’s terms and conditions note it will use methods of instant contact when necessary. There was no reason the company could not have contacted Alan to tell him his account was suspended.

However, the length of time taken to investigate the claim was not unreasonable. The investigation from start to finish took 16 days. In the circumstances, this was not a lengthy period of time. 

 

Resolution

We recommended that the travel card company pay $500 for the inconvenience the company had caused Alan. Both parties accepted our recommendation.

 

Insights for consumers

Anti-money laundering laws have wide reaching powers. The financing of terrorism is a real threat and companies who deal with money are confined by strict rules. A small amount may not seem sufficient to warrant an investigation but the You may not consider a small amount is enough to warrant an investigation, however the penalty for allowing a suspicious transaction to be processed is significant. Where transaction details do not match, the cardholding company will be notified and will need to satisfy their legal requirements.