Redbox 2007 Annual Report Download - page 16

Our money transfer services business requires us to meet specific federal, state, local and foreign laws and
government regulations, subjecting us to additional risk.
The money transfer industry is heavily regulated, both in the United States and internationally. We operate our
money transfer services business under the authority of the licenses and approvals that we have obtained where
required from the various jurisdictions in which we operate. There is no assurance that we will be able to maintain
these licenses and approvals in the future.
In operating the money transfer services business in the United States for example, we are responsible for
compliance with a variety of state laws and regulations, including licensing requirements, applicable to the
business. In addition, we are subject to United States federal anti-money laundering laws, including United States
Department of the Treasury registration requirements and reporting requirements for suspicious and certain other
transactions, and the requirements of the Office of Foreign Assets Control, which prohibit transmitting money to
specified countries or to or on behalf of prohibited individuals or entities. If we were to transmit money to or on
behalf of, or otherwise conduct business with, a prohibited individual or entity, we could be required to pay
significant damages, including fines and penalties, and our ability to conduct business in the United States and other
jurisdictions could be limited. The USA PATRIOT Act mandates several anti-money laundering requirements. Any
violation of anti-money laundering laws could lead to significant penalties, and could limit our ability to conduct
business in the United States and other jurisdictions.
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 are responsible for compliance with these laws
and regulatory requirements in those countries in which we operate the money transfer services business. Although
most countries in which we 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, or as discussed below the failure of a money services business that we have acquired to
comply before our acquisition, with the laws and government regulations in jurisdictions in which we operate, or in
which the acquired company operated 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 over
140 countries as of December 31, 2007. 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.
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