Prepaid cards appeal to money launderers, fraudsters

Federal authorities are working to reign in money laundering and fraud using prepaid money cards like MoneyPak, a relatively new tool for fraudsters and smaller-scale laundering.

According to a story in the New York Times, MoneyPak and pre-paid cards like it provide quick and easy transfers of cash that are difficult to track. The prepaid cards themselves are entirely legal and are an appealing option for consumers that lack bank accounts or access to traditional credit cards. In fact, American consumers are expected to put at least $80 billion on prepaid cards this year, an amount more than double the usage only four years ago.

Common scams involving prepaid cards include fraudsters that convince consumers to pay an upfront processing or enrollment fee via the card in expectation of a greater return payment—say a loan or a mystery-shopper ‘salary’—at a later date.

The Federal Trade Commission received official reports in 2013 of over $40 million in consumer fraud from prepaid cards, but they expect that the true figure is much higher due to underreporting.

The money laundering element in prepaid cards is significant as well. For example, the Drug Enforcement Administration last year lodged a criminal complaint against Olivia Louise Bolles, an American doctor who allegedly sold drugs on Silk Road and who is accused of using MoneyPak cards to launder the proceeds. Other cased cited by the Times included drug-running operations in Maryland’s prison system and a North Caroline case that involved MoneyPak payments for prostitution services.

Prepaid cards like MoneyPak are available at tens of thousands of locations including stores like CVS, Walgreens, and Wal-Mart. MoneyPak, which is offered by a bank holding company call Green Dot, uses a 14-digit access code that the holder can give to anyone, thereby facilitating card-to-card transfers. It is this feature that has made it susceptible to fraud. Green Dot has announced that it will transition to a system that eliminates the access code and allows consumers to add value to the card by a card-swipe machine connected to a Green Dot processing center.

While this is expected to greatly reduce the appeal of MoneyPak to fraudsters and money-launderers, authorities caution that many other vulnerable prepaid money cards will remain available.

Start achieving more today.

We are so confident in the power of RegTechONE to transform your GRC and AML Compliance solutions that we will prove it to you. Contact us today to experience all the ways that RegTechONE is The Power of Everything.

AML Partners logo/wordmark in white

347 Village Street
Concord, NH USA 03303

Copyright © 2023 AML Partners. All rights reserved.