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U.S. Officials Scrutinizing Possible Exploitation of Secondary Market for Gift Cards, Say Sources
By Colby Adams
printThe rise of online vendors offering to buy bulk gift cards is drawing the attention of investigators who believe the nascent industry may serve as an avenue for money launderers. U.S. officials have previously warned about the misuse of so-called "closed-loop" cards, but focused largely on the potential exploitation of "open-loop" stored value products, such as prepaid ATM cards that allow users to withdrawal money from domestic and international locations. Gift card buyers, by contrast, can ostensibly redeem value only for goods and services. But over a dozen Web sites offer services that could make it easy for criminals to...
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As U.S. officials work to shield American prepaid cards from abuse by financial crooks, foreign-issued stored value products remain a relatively easy avenue to move money into the United States anonymously.
Government often moves slowly and (hopefully) deliberatively, but one might wonder whatever happened to those pre-paid card readers being tested along U.S. borders.
Lobbying by the world's largest stored value payment facilitator has indefinitely delayed, and perhaps permanently blocked, a plan to give customs officials the ability to read prepaid cards, say sources.
American officials will begin field-testing prepaid card readers at U.S. border stops next month as part of the lead-up to the Treasury Department regulations governing their cross-border transport, say officials.
The U.S. Treasury Department proposed Monday to place non-bank providers of prepaid access products into a distinct category of money service businesses in an effort to impose Bank Secrecy Act regulations on the prepaid card industry.
Lawmakers proposed a measure Wednesday that would potentially prohibit banks from processing credit card transactions for merchants and maintaining correspondent accounts for financial institutions deemed vulnerable to money laundering and tax evasion.
The U.S. Treasury Department remains on schedule to issue regulations early next year that will bring stored-value cards under the purview of the Bank Secrecy Act, according to a government official.
Terrorist financing typologies that many in the banking compliance industry have struggled to find do exist, but they are initially difficult to identify, according to Grahame White, a detective constable for the National Terrorist Financial Investigation Unit in the United Kingdom.
The European Union proposed rules Tuesday on how electronic money might be issued, a step meant to further expand the market for prepaid and stored value payment products.
A U.S. Treasury Department ruling that clears merchants that reload stored value cards of Bank Secrecy Act compliance responsibilities may unfairly place that responsibility on bank sponsors of reloadable card programs, consultants say.
Merchants and automatic teller machines that help customers reload stored value cards do not necessarily qualify as money services businesses subject to anti-money laundering regulations, the U.S. Treasury Department said.
U.S. Senator Charles Grassley, who last year proposed a bill that would expand the power of prosecutors to include money laundering charges in a criminal case, will amend the proposal to account for "new and emerging trends," in stored value and prepaid cards and other issues.
Software firm MindArk, creators of Entropia Universe, is on the verge of releasing automated teller machine-style cards that allow players to access real dollars from their virtual world accounts, something consultants say will make them an attractive venue for criminals to launder illicit funds.
Because AML regulation for cards is "unclear," they "provide an ideal laundering instrument to anonymously move monies associated with all types of illicit activity, without fear of documentation, identification, law enforcement suspicion, or seizure," according to a federal government report.