Scanning Prepaid Cards At The Border Won’t Stop Money Laundering
October 18, 2012
An article in a recent issue of PayBefore describes how U.S. customs agents will soon start testing prepaid scanners in order to stop money laundering. The device comes as part of a move to comply with U.S. Treasury rules that say individuals crossing the board must declare when they are in possession of more than $10,000 in prepaid cards.
The rule comes from a mistaken belief on the part of regulators that it is possible to load large amounts of money onto prepaid cards anonymously and easily move it across the border. It would be amazing if agents found anyone even close to the $10,000, but the expectation that they will comes from a fundamental lack of understanding about the industry.
Prepaid card program managers have policies and procedures in place to prevent this kind of occurrence. Load limits well below $10,000 will keep most criminals from thinking about them as a way to move large amounts of money. Program managers also limit the number of cards that can be purchased in a day and look for unusual patterns of transactions. In addition, most prepaid card program managers have registration requirements for cards above a certain dollar amount – some as low as $250. Program managers can also keep their cards from being used internationally without some kind of registration.
In addition, thanks to the Office of the Comptroller of the Currency’s guidance on third party prepaid risk, banks are scrutinizing prepaid card program managers’ anti-money laundering procedures and making them put policies and procedures in place that require collecting information from customers similar to that collected for a bank account.
Finally, prepaid cards leave records. They allow transactions be traced. Most criminals want to be able to take their money and disappear off the radar, not leave tracks across several countries.
Implementation of the law also will likely lead to complications. As the Paybefore article points out, there are prepaid cards that may look indistinguishable from bank-issued debit cards. Will agents take debit cards in the mistaken belief that they are prepaid card or let prepaid cards through in the belief that they are debit cards? This issue could reduce the effectiveness of the measure lead to legal troubles down the road.
While criminals will use any tools at their disposal to avoid getting caught, scanning every travel card at the border is not going to pick up much money laundering. The safeguards put in place by the industry mean that criminals will not use prepaid in this manner to move cards and funds around.