Redbox 2006 Annual Report Download - page 17

In addition, the money transfer industry is subject to international regulation, which varies from country to
country. In certain countries in which we operate, we are required to maintain licenses or other governmental
approvals in order to operate this business. As described above, we will be responsible for compliance with these
laws and regulatory requirements in those countries subject to the TSA when the money transfer services
business in those countries has transferred. Although most countries in which we operate or will operate this
business do not regulate this business to the same degree as the United States, this could change in the future.
Failure to comply with the laws and government regulations in jurisdictions in which we operate the money
transfer services business could result in, among other things, revocation of required licenses or registrations, loss
of approved status, termination of contracts with banks or retail representatives, administrative enforcement
actions and fines, penalties or other damages, class action lawsuits, cease and desist orders, and/or other civil and
criminal liability. The occurrence of one or more of these events could adversely affect our business, financial
condition and results of operations. Furthermore, additions to or changes in the laws, regulations or other
industry practices and standards in the United States or any of the foreign countries in which the money transfer
services business operates could also increase our compliance and other costs of doing business, require
significant systems redevelopment, reduce the market for or value of our products or services or render our
products or services less profitable or obsolete, lead to a loss of agents, and have an adverse effect on our results
of operations.
Our money transfer service is and will remain reliant on an effective agent network.
Substantially all of the money transfer services revenue is generated through an agent network spanning 142
countries. Agents include banks and other financial institutions, regional micro-finance companies, chain stores
and local convenience stores. Transaction volumes at existing agent locations often increase over time and new
agents provide us with additional revenue. If agents decide to leave our network, or if we are unable to sign new
agents, our revenue and profit growth rates may be adversely affected. Agent attrition might occur for a number
of reasons, including a competitor engaging an agent or an agent’s dissatisfaction with its relationship with us or
the revenue derived from that relationship. In addition, agents may generate fewer transactions or less revenue
for various reasons, including the appearance of competitors close to our agent locations or increased
competition. Because an agent is a third party that engages in a variety of activities in addition to providing our
services, an agent may encounter business difficulties unrelated to its provision of our services, which could
cause the agent to reduce its number of locations, hours of operation, or cease doing business altogether. The
failure of the agent network to meet our expectations regarding revenue production and business efficiencies may
negatively impact our business, financial condition and results of operations.
Further, failure, either intentional or unintentional, by our agents to comply with the laws and regulatory
requirements of applicable jurisdictions, including anti-money laundering, consumer privacy and information
security restrictions, could result in, among other things, revocation of required licenses or registrations, loss of
approved status, termination of contracts with third parties, administrative enforcement actions and fines, class
action lawsuits, cease and desist orders and civil and criminal liability, as well as damage to our reputation. The
occurrence of one or more of these events could materially adversely affect our business, financial condition and
results of operations.
Our money transfer services may involve the movement of large sums of money, and, as a result, our business
is particularly dependent on our ability to process and settle transactions accurately and efficiently.
Our money transfer services involves the movement of large sums of money. Money transfer services
revenues consist primarily of transaction fees that are charged for the movement of money. These transaction
fees represent only a small fraction of the total amount of money that is moved. Because we are responsible for
large sums of money that are substantially greater than the revenues generated, the success of this business
particularly depends upon the efficient and error-free handling of the money that is remitted and that is used to
clear payment instruments or complete money transfers. We rely on the ability of our agents and employees and
our operating systems and network to process these transactions in an efficient, uninterrupted and error-free
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