Gift cards and money laundering

The gift that keeps on taking

By Ron Marden, Ph.D., Educator Associate, CPA, CIA;Randy Edwards, Ph.D., CPA

Gift cards are the perfect solutions for birthdays and holidays. Unfortunately, they're also becoming the perfect tool for money launderers and they're not interested in giving. Here are the facts for fraud examiners who need to know about the newest scam. 

When Grandma doesn't know what to get for little Susie's birthday it's a quick trip to just about any store you can think of or a simple walk over to the computer to purchase a gift card. The result is that Susie (and anyone else who Grandma wants to give a card to) can now get whatever she wants and she's happy. And the amount Grandma puts on the card is whatever she can afford depending on how many brothers, sisters, sons, daughters, nieces, nephews, and grandchildren she has. It's the perfect gift - what could be simpler and easier to give and use?

The problem is that gift cards might be a little too easy to use. Consider the potentially sinister side. According to Jeffery Ross, a senior adviser with the U.S. Department of the Treasury's Office of Terrorist Financing and Financial Crime, terrorists and money launderers might find it easier to escape detection by using gift and other prepaid cards.

Ross says that criminals are increasingly using the cards, some of which are bought with "digital currency" via the Internet, to avoid leaving financial fingerprints. The Department of the Treasury is considering new regulations to help monitor the $163 billion (U.S.) stored-value industry, which includes gift, long-distance, transit, payroll, and money cards redeemable at automated teller machines.1  

While casinos and banks are among the most established means for laundering, money launderers are increasingly turning to such methods as online payment services and gift cards to move their illicit funds because they provide anonymity.2  

The scheme is so new that there's a dearth of known case histories.




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