A couple of months ago, traffic police in Alabama stopped a car and noticed the smell of marijuana. They searched the car and found forty gift cards with a total balance of US$19,600, along with “numerous receipts showing repetitive reloading of the gift cards from various stolen credit card numbers”. Further investigation into the gift cards has found them to be connected to a Haitian-based criminal group that is stealing and selling credit card numbers, and is responsible for about $10 million in losses. The police chief concerned (who may be something like this Bond one, although he was in neighbouring Louisiana) explained that “one of the things they were doing was stealing people’s identities, then putting money on the gift cards, and either cashing the cards or using them for goods like electronics”.
In the latest tranche of changes proposed to the Fourth Money Laundering Directive, much attention is focused on prepaid cards because (as the Council of Europe puts it) “anonymous prepaid cards are easy to use in financing terrorist attacks and logistics. It is therefore essential to deny terrorists this means of financing their operations, by further reducing the limits and maximum amounts under which obliged entities are allowed not to apply certain customer due diligence measures.” Their position as of 14 November 2016 – and this text must still be voted on in the European Parliament early in 2017 (that 26 June 2017 deadline is looking scarier by the minute) – is that “it is essential to lower the existing thresholds for general purpose anonymous prepaid cards and to identify the customer in the case of remote payment transactions where the amount paid exceeds EUR 50”.
Of course, we are now in the bumper season for prepaid cards, and specifically for gift cards. The main attraction of gift cards for money launderers is their anonymity: if you pay cash to load up a gift card, there are (currently) no CDD or reporting requirements. Moreover, gift cards are not considered monetary instruments, which means that they do not have to be declared and cannot be seized at the border. And cash sniffer dogs can’t find them – unless you’ve smeared them in liver sausage, which would be reckless. Criminals can buy a stack of gift cards and then give or post them to an associate who can then redeem them for products (such as high-end electronics) that can be sold. In what is to me a new development, there is also now an active secondary market in gift cards, including on websites such as Zeek – you’ve probably seen their telly ad campaign. So a criminal can put dirty cash onto a gift card entirely anonymously, and then sell it on – at a discount, certainly, but this will still be less than he usually has to spend to launder his money. It all takes time and plenty of people, but it seems that criminal organisations never lack these two resources when it comes to money laundering.