Gift card vouchers can be the perfect solution for a birthday when you’re not sure which present to buy. Simply pay cash at the store or shopping mall and transfer the same value onto the voucher to be used at the designated outlets. Travellers Cheques have been replaced by `Travel Money Cards’ following the same principle – customers deposit funds onto a separate ATM card which are available in various currencies. Incorporating a PIN, the customer can then withdraw the funds from ATM machines in a foreign country until the card is spent. If the card is stolen then the most that can be lost is the value still stored on the card.
But such convenience has also attracted fraudsters, organised crime gangs and terrorist groups to solve a problem they all face; how to move funds between individuals around the country and overseas without the threat of being apprehended at Customs for cash smuggling.
Recent arrests in the US have documented that some crime groups are increasingly using the cards, many of which are bought with “digital currency” via the Internet using fake credit cards or compromised bank accounts. With casinos and banks the most established means for money laundering and thus coming under heavier scrutiny for AML, medium scale money launderers are increasingly turning to `Travel Money Cards’ to distribute their illicit funds because they provide ease and anonymity.
Gift voucher cards are normally designated as closed-system or closed-loop cards because they can only be used at the retailers or shopping mall that issued them. Other than retailers, other types of uses for closed-system cards include telephone, internet, dining or hotels.
Whereas open-system cards (such as those linked with card companies VISA and MasterCard) can be used at most retail stores and many of them are useable as ATM cards where the card holder can withdraw the value on the card in cash from most ATM machines in the world.
Because these cards can also be reloaded with funds via online transactions, at a bank or via a cash-tills transaction, they’re an effective method for fraudsters, criminals and money launderers for distributing funds quickly and covertly.
Criminals can thus load cash onto multiple pre-paid open-system cards and FedEx the cards to their counterparts outside the country. The counterparts can then withdraw the funds in cash in their own currency with ease from local ATM machines. When the card is spent it can be discarded and the cash is untraceable. Recent DEA investigations into criminal activity spanning international borders have noted an increase in the use of pre-paid cards with bulk cash smuggling activity.
As the retailers and banks are set to gain when consumers buy these cards – the user has to shop in their store or else the balance says with the bank until it’s depleted – individuals and businesses often purchase large numbers of cards and this doesn’t raise any red flags. Thus a fraudster can place several thousand dollars on a retail gift card or bank card and not have to deal with a currency transaction report and it is unlikely to be recorded on a suspicious activity report. In fact, fraudsters often will divert attention by breaking a large-dollar amount into a number of smaller amounts at different outlets (the method of laundering sometimes referred to as `smurfing’ – named after the little blue cartoon characters).
Open-system cardholders generally do not have to disclose details of their own bank accounts. In many jurisdictions, the banks handling the money that flows through the gift cards are required only to conduct customer due diligence and customer identification procedures on the independent firms that manage the cards and not the individual cardholders.
Fraudsters can muddy the waters further by purchasing a number of cards from several different retailers or banks at different locations or else have a trusted friend to do so. The cards can then be carried on board a flight or else mailed to an associate interstate or overseas and redeemed there. An enterprising fraudster can even sell the cards on websites such as eBay, Gumtree, www.SwapaGift.com or www.CardAvenue.com. The cards are sold at a slight loss but it’s another way to convert the cards into funds.
Investigators and fraud examiners need to be aware of this relatively new method to launder funds by criminals and fraudsters. Whether they can spot company funds being used to buy these cards or else evidence that a suspect has been engaged in such activity [from web browser activity or emails], this may lead to unearthing a considerable fraud or other crime that needs to be pursued further.
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