By Bernd Debusmann
The Great Debate - Reuters
Friday, March 26, 2010
http://blogs.reuters.com/great-debate/2010/03/26/drugs-terrorism-and-shadow-banking/
The trouble with moving big amounts of cash, from a criminal’s point of view, is threefold. It’s bulky, it’s heavy and it smells.
A stash of $1 million in mixed bills weighs around 100 pounds (50 kilos). Specially-trained dogs can sniff out bulk cash in a heartbeat.
All of which helps to explain why drug cartels and financiers of terrorism appear to have been making increasing use of what FBI chief Robert Mueller calls a shadow banking system.
Its features include a legal loophole that allows money launderers to get around the requirement that cash or “monetary instruments” (share certificates, travellers’ cheques, money orders etc.) in excess of $10,000 must be declared on entering or leaving the United States.
It is, however, perfectly legal to carry, say, $50,000 embedded in the magnetic stripes of so-called pre-paid stored-value cards.
They look like a credit or debit card but are not linked to a bank account, can in many cases be loaded anonymously, are not “monetary instruments” under U.S. law, and were labelled “the ideal instrument for large-scale drug trafficking and money-laundering operations” in a 2006 analysis by the National Drug Intelligence Center.
It predicted that drug traffickers, narco-terrorists and other criminals would increasingly rely on stored-value cards — “superior to established methods of money laundering” — because they could be used without fear of documentation, identification, law enforcement suspicion or seizure.
In other words, a shot in the arm of the global money laundering industry, an illicit enterprise that accounts for between 2 and 5 percent of the world’s GDP, according to an estimate by the International Monetary Fund. The Center’s dark warnings did little to curb the rapid growth of the stored-value card industry — more than $300 billion a year by some estimates.
At a congressional hearing in mid-March, the FBI’s Mueller reported that “recent money laundering investigations have revealed a trend on the part of criminals to use stored-value devices such as pre-paid gift cards and reloadable debit cards in order to move criminal proceeds.
“This has created a shadow banking system…”
The largely unregulated stored-value card industry, he said, made it difficult for law enforcement to spot transaction patterns that can help identify money launderers and financiers of terrorism.
For further reading:
"Real criminals use virtual worlds to launder money"
, Press Release, University of the West of England, March 22, 2010
"Money launderers going high-tech"
,
Miami Herald
, March 18, 2010
"Virtual Money Inc. Bust Now Linked to Colombian Drug Money"
,
DGC Magazine
, December 9, 2009
"More on the cash menace"
, Dave Birch, September 21, 2007
"How to Launder Money in the Futures Market"
, J. Orlin Grabbe, November 24, 1996