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Article Information:
Title:
Regulating the cross-border movement of prepaid cards
Author(s):
Courtney J. Linn
Journal:
Journal of Money Laundering Control
Year:
2008
Volume:
Issue:
Page:
146 - 171
ISSN:
1368-5201
DOI:
10.1108/13685200810867474
Publisher:
Emerald Group Publishing Limited
Acknowledgements:
The author is an Assistant US Attorney in the Eastern District of California and formerly served on detail to the Legal Policy Unit of the Asset Forfeiture and Money Laundering Section of the Criminal Division, US Department of Justice. The author's views do not necessarily reflect those of the US Department of Justice or its agencies. Thanks also to Ivy Nowinski for her help in researching the paper, and David Muradyan for his help in editing it. Thanks also to Lesley Kinsely at the National Drug Intelligence Center and Lori A. Cole at US Customs and Border Protection for their helpful comments. And, special thanks to Patrice Motz who provided insightful comments on several drafts of this paper.
Document Access:
Abstract:
Purpose – The term “prepaid card” refers to the pre-payment of value process, i.e. pay now and extract value later, and describes most of the prepaid/stored value products available today. These cards have largely supplanted paper gift certificates and travelers checks, and are used as alternatives for traditional paper-based transactions such as payroll payments, cross-border remittances, and government assistance or welfare benefit programs. However, the same attributes that make open-system prepaid cards attractive to legitimate customers make them attractive to money launderers. The purpose of this paper is to make the case for subjecting certain prepaid card products (but not all) to Report of International Transportation of Currency or Monetary Instruments (CMIR) requirements.
Design/methodology/approach – Addresses how the US law-enforcement agencies might reconstruct the CMIR enforcement regime to address the unique challenges that prepaid card products present.
Findings – The money laundering threat posed by these products is not immediate, but it is not conjectural either. US law-enforcement agencies (and perhaps ultimately the courts) will be required to address the fourth amendment and privacy issues that may arise when a customs officer “searches” a prepaid card by swiping it and ascertaining the value of the funds associated with that card.
Originality/value – The paper is of value by showing that problem issues can be surmounted, provided the enforcement regime is narrowly targeted to include only those prepaid card products that bear the closest resemblance to currency, and provided the funds associated with those products are maintained in pooled accounts.
Keywords:
Data handling, Electronic funds transfer systems, Money laundering, United States of America
Article Type:
Research paper