U.S. Aims to Track 'Untraceable' Prepaid Cash Cards

by Mercator Advisory Group 0

The Federal Government believes the prepaid industry offers criminals and terrorists an easy way to move money according to an article on msnbc.com that does little to explain the work done by the industry to prevent crime. According to the article, government officials believe that prepaid cards can be and are used to move large quantities of cash across borders for criminals in ways that are completely undetectable.

Such cards make “the challenge of smuggling heavy stacks of cash nearly obsolete,” Kumar C. Kibble, the deputy director of U.S. Immigration and Customs Enforcement, told Congress in March.

Jasbir Anand, a senior consultant at ACI, said the funds represented on such cards, which you can easily buy online, could “travel across borders without limitation.”

Yet, these assertions ignore load limits, customer identification requirements, and even limitations on where cards can be used that are placed on programs by their managers, issuers, and processors. The article points out that cards which can accept lower card loads – which are those that can remain anonymous, are exempted from the rules.

The article also ignores the fact that open-loop prepaid cards are issued by banks, so it is not a wild west of card providers as the article describes.

That’s not an issue for banks, which are heavily regulated and have processes in place because they already monitor billions of credit and regular debit cards. But many other previously unregulated or lightly regulated businesses issue or administer prepaid card programs: online shopping services, corporate rewards card programs, third-party payment processors — even celebrities, like the Kardashian sisters, who withdrew their Kardashian Kard from the market last year after customers complained about its high fees.

Does anyone really believe that the Kardashian sisters were actually the ones issuing or administering cards?

Additionally, in the wake of the OCC guidance on managing prepaid card risk, banks will be watching third-party partners much more closely now. So, this issue is not nearly as simple as described.

It is important to point out that prepaid cards helped the investigation of an international assassination in Dubai. The cards were traceable so that the police were able to determine stolen identities used by the assassins in the case. For more on that, please see: “The Case of Payoneer and Metabank May Change the Prepaid Value Chain: The murder of Mahmoud al-Mabhouh in Dubai could disrupt the prepaid business model in the United States.

This article points out a bigger problem for the industry, which is that the industry has not educated law enforcement, government agencies, and the public about all the things it has done to prevent these problems. More work needs to be done in order to prevent increasingly onerous legislation and regulation.

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