Redbox 2008 Annual Report Download - page 19

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
approximately 140 countries as of December 31, 2008. 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 changes in economic circumstances
affecting customers and potential customers, 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. Moreover, we
could suffer financial loss and additional liability from the failure for any reason of our agents to provide good funds
in a money transfer. 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, in connection with our money transfer services business or otherwise, 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, seizure or forfeiture of our funds, 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 business involves 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 business involves the movement of large sums of money. For example, our 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. Further, our coin-counting, DVD and
entertainment services businesses require the effective transfer of large sums of money between many different
locations as well. Because we are responsible for large sums of money that often are substantially greater than the
revenues generated, the success of our 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 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 manner. In addition, we rely on third-party vendors in our business, including, among
others, clearing banks which clear our money orders, official checks and money transfers, and certain of our
telecommunication providers. In the event of a breakdown, catastrophic event, security breach, improper operation
or any other event impacting our systems or network or our vendors’ systems or processes, or improper or other
17