Drug cartels cash in with value cards
Drug runners along the U.S.-Mexico border are using stored-value cards to smuggle billions of dollars of cash into the United States. A Senate committee is investigating what can be done to stop them. Dan Grech reports.
Cars drive across Mexico/U.S. border (David McNew/Getty Images)
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Kai Ryssdal: Secretary of State Hillary Clinton is in Mexico today where she said an insatiable appetite for drugs here has been fueling a lot of the drug violence along the border. Back in Washington, meanwhile, a Senate committee took up another breach in the border today, one that allows billions of dollars in drug money to enter the U.S. every year. From the Americas Desk at WLRN, Marketplace's Dan Grech reports.
DAN GRECH: They're called stored-value cards. They look like your run-of-the-mill gift card, a piece of plastic with a magnetic strip. But they're being used by drug runners and money launderers as an almost invisible way to smuggle cash.
Charles Intriago is a former federal prosecutor and founder of Money Laundering Alert.
CHARLES INTRIAGO: They're so small. I mean, just think, you could be holding what looks like a credit card in your hand, and it could be holding a million dollars. And you sneak them in some suitcase.
Drug cartels at the Mexican border use the cards to smuggle an estimated $8 billion to $24 billion a year. Though stored-value cards can sometimes be used to draw money out of ATMs, the cards are not considered legally a monetary instrument or cash.
INTRIAGO: Nobody has the authority to ask you to take your wallet out and report how much money may be implanted in a stored-value card. So it's easy to move dirty money.
The Senate committee wants to close that loophole. One proposal is to amend the Bank Secrecy Act to declare stored-value cards a monetary instrument. But the $300 billion-a-year, prepaid card industry would resist that change. Terry Maher is General Counsel for the Network Branded Prepaid Card Association. He says existing bank regulations have enough teeth to police stored-value cards.
TERRY MAHER: We don't want to see these products misused for money laundering or terrorist financing. So we want to work with the regulators and law enforcement to minimize the chances of that happening.
Other ways to limit smuggling would be to prohibit stored-value cards from being used at ATMs or after you cross the border into Mexico.
I'm Dan Grech for Marketplace.
Comments
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From WA, 04/14/2009
Unfortunately, the comments of Mr. Intriago detract from true value and security stored value cards provide to the underbanked. U.S. and international banking regulations, the U.S. Patriot Act, and velocity limits, in concert, safeguard against these extreme cases.
From New York, NY, 03/30/2009
I cannot believe what I'm reading! I have known Charles Intriago for years, and I can attest to the unquestionable fact that he is a marketing genius. However, I cannot say that he is equally qualified or knowledgeable about stored value cards. If a stored card is "holding a million dollars" it can ONLY be either a) a credit card with a $1M credit line, or b) a debit card tied to a checking account with a $1M balance, both of which are considered as "stored value" but are not technically such, because they are just "tokens" or "keys" tied to an underlying account (which, by the way) can only be issued bank, not other financial institutions such as MSBs. His comments are absolutely misleading, as unaware readers may by extension such an assessment to apply ALSO to other types of stored value cards, such as gift cards and cross-border remittance cards, which can NEVER hold a million dollars by design. Therefore, Mr Intriage should be more careful to qualify his comments, unless he's trying to artificially instill a sense of fear in the reader, which AML professionals sometimes tend to do as tactic to promote their services, and the editors of Marketplace should also complement with comments by experience financial services professionals.
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