Criminals using prepaid cards to launder money 05/23/2011 Dallas Morning News - Online
Published 22 May 2011 10:45 PM BOGOTA, Colombia Forget bulk cash. Heavy and hard to hide, it's simply not the most convenient cross-border conveyance for a 21st-century money launderer. A safer and increasingly attractive alternative for today's criminal is electronic cash loaded on stored-value or prepaid cards. Getting them doesn't require a bank account, and many types can be used anonymously. U.S. crime fighters consider the cards a burgeoning threat that regulators haven't adequately addressed. In the past year, said John Tobon, a senior U.S. Immigration and Customs Enforcement agent, the cards have become the preferred means of paying couriers who transport illicit drugs across the U.S. No one knows how big a role the cards play in moving the more than $20 billion in drug earnings that U.S. authorities estimate crosses from the U.S. to Mexico annually. Yet while anyone crossing that border with $10,000 or more in cash must declare it, prepaid cards are legally exempt. It was bank and wire-transfer records that enabled law enforcement to identify the 9/11 hijackers and their overseas cells. Had the 9/11 terrorists used prepaid cards to cover their expenses, none of these financial footprints would have been available, a U.S. Treasury Department report observed. Visually, the cards are barely distinguishable from credit or debit cards and the most versatile let users reload them remotely without having to reveal their identity, using cash or online payment services. Some cards can process tens of thousands of dollars a month. Just load them up in Connecticut or Texas with, say, the proceeds of cocaine sales and collect the cash in local currency from an ATM in Medellín, Colombia, or elsewhere in Latin America. In one of the first cases to clue law enforcement to the threat, Dallas-based Virtual Money Inc. provided the cards to crews who helped Colombian drug traffickers move at least $7 million to Medellín during three months in 2006, prosecutors say. The money moved digitally, and Virtual Money allegedly violated U.S. law by not reporting transfers above $10,000 or other activity suggesting illegal money movement. David Zapp, a New York attorney for a defendant sentenced to 45 months in prison in the case, said his client was a small player in a scheme in which cards had relatively low load limits of $1,000. The trick was volume and the ability to replenish the cards. Some launderers probably had 400-500 cards, he said. Law enforcement officials won't discuss the case because Virtual Money's president, Robert Hodgins, remains a fugitive. In 2008, his suburban Oklahoma City home, more than $250,000 and two cars were seized. Investigators said they were able to get an informant inside Virtual Money. Generally, cases tend to be difficult to build because money movements must be linked to a crime. State and local police in the U.S. are only just waking up to the cards, so ICE created an explanatory pamphlet it is distributing far beyond Customs and Border Patrol agents. We're involved in a case much larger than Virtual Money, said Paul Campo, chief of the DEA's financial crimes unit. It is in the Southwest U.S., he said, adding that the DEA also has active cases in New England and the state of Georgia. An October report by the 34-nation Financial Action Task Force that sets global anti-money laundering standards, cites just a half dozen laundering cases involving prepaid cards in their short history each involving from $200,000 to $5 million. Yet Tobon says they have in the past year or so become the preferred method for paying smugglers to move drugs across the U.S. The Treasury wants to require any business selling cards that can be used internationally to keep customer identity records and report suspicious transactions. That would affect more than 43,000 U.S. sellers ranging from mom-and-pop groceries to chains such as Wal-Mart. The prepaid card industry is balking, saying such rules would hike administrative costs that would eventually land on consumers. [Non-text portions of this message have been removed] ------------------------------------ -------------------------- Want to discuss this topic? Head on over to our discussion list, [email protected]. -------------------------- Brooks Isoldi, editor [email protected] http://www.intellnet.org Post message: [email protected] Subscribe: [email protected] Unsubscribe: [email protected] *** FAIR USE NOTICE. 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