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Terrorists looking to launder money and avoid the detection of law-enforcement agencies may find prepaid cards and mobile funds transfers useful, according to a report released yesterday by The Washington Institute for Near East Policy, a Washington, D.C.-based nonprofit organization that studies the Middle East and policies relating to the region. Under current law, no regulations limit the amount of funds an individual can load onto a prepaid card and take out of the country, according to the report entitled "The Money Trail, Finding Following and Freezing Terrorist Finances." Though no one is sure how much money individuals have moved overseas using prepaid cards or how much may have gone to terrorists, governments and businesses should be aware of the potential vulnerability, Mathew Levitt, director of the institute's Stein Program on Counterterrorism and Intelligence and one of the authors of the report, tells CardLine. Mobile payments are another way terrorists can move funds, especially in areas such as Africa, where the financial system is less developed, the report says. "One of the things we need to do is identify our vulnerabilities and try to deal with them without hurting commerce," Levitt says. The report paints an incomplete picture about the status of prepaid cards, Judith Rinearson, a partner with New York-based law firm Bryan Cave LLP, tells CardLine. The cards that concern law enforcement are those that can consumers can use to make purchases and withdraw money from ATMs anywhere in the world, Rinearson says. "These cards only work on established payment networks such as Visa, MasterCard, American Express and Discover, and they are issued by regulated banks and financial institutions, which are fully regulated under the Bank Secrecy Act," Rinearson says. While there are risks from prepaid cards, the card industry has taken steps to minimize them, such as through load and spending limits, customer-identification rules and transaction monitoring, Rinearson says.
