Credit Cards, Miscellaneous, X Files

Gift Cards & Money Laundering

I came across and interesting article about the dark side of gift cards and how they are being used by criminal elements to launder money. These aren’t the store brand gift cards, bur the credit card bank affiliated gift cards that can be reloaded with money at any ATM. The problem is that there is no need for a bank account or any identifying information with these gift cards thus making the money put on them difficult, if not impossible, to trace and a convenient way to launder money:

Law enforcement officials say these newer cards, many of which can be reloaded online or at checkout counters, are an ideal tool for credit-card thieves, drug rings, and even terrorist cells. “It is a great concern to DEA and the FBI because of the terrorist financing angle,” says Don Semesky, chief of the office of financial operations at the Drug Enforcement Administration…

That bank/nonbank link is the key to the problem, since the cards have ATM privileges but are not linked to personal bank accounts, which are closely monitored. “It’s a very easy way to launder money,” says Larry D. Johnson, head of the Secret Service’s criminal investigative unit. Cards are easier to smuggle than cash across the border. Although at some point purchasers are supposed to provide basic identification to vendors of the cards, in reality it can be hard to trace ownership. “This is not just an issue in the U.S., but throughout the global financial community,” says Daniel Glaser, deputy assistant secretary for Terrorist Financing & Financial Crimes in the Treasury Dept.

Law enforcement officials have not yet prosecuted many cases involving prepaid cards, but they see the impact already. In one case this year, a Mexican criminal caught at the border used stolen credit cards to transfer funds onto prepaid cards. And U.S. police in the Southwest have noted clear changes in money movements across the border, where they closely track suspicious wire transfers. The number of dodgy transfers is drying up. “The dollar numbers that we’re looking at are declining dramatically,” says Arizona Assistant Attorney General Cameron H. Holmes. “The use of stored-value cards is, if not the main reason, at least one reason they are able to escape our scrutiny…

The bigger question is whether these cards can be used for far more frightening purposes. An internal U.S. Treasury report notes that the Sept. 11 hijackers were later identified by their bank accounts, card signatures, and wire transfers. “Had the terrorists used prepaid cards to cover their expenses, none of these financial footprints would have been available,” the report said. A chilling thought.

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