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Homeland Security

12 January 2006

Money Launderers Increasingly Use Prepaid Services, Report Says

New pattern constitutes a challenge for banks, Treasury's Levey says

By Todd Bullock
Washington File Staff Writer

Washington -- Gift cards, phone cards, other prepaid services and Internet banking give criminals new opportunities to launder money from their crimes, according to a report from U.S. financial and law enforcement agencies.

The Money Laundering and Threat Assessment (MLTA), released January 11 by 16 agencies, is the first governmentwide analysis of money laundering in the United States. A working group, which prepared the report, analyzed law enforcement statistics, observations and regulatory data to assess the vulnerabilities that allow criminals to launder money in the U.S. financial system.

Under Secretary of Treasury for Terrorism and Financial Intelligence Stuart Levey, who briefed reporters January 11, cited the use of prepaid phone cards as "an emerging cash alternative for both legitimate consumers and money launderers."

He said that these cards provide an "easily transportable and anonymous way to store and access cash."

"Because of the success we had in getting some of this [laundered money] … out of the banking system, criminals are looking for alternative ways," Levey said.

"They are intelligent people and innovative," he added.

Levey said the move away from face-to-face interactions with customers is challenging the ability of financial institutions, especially banks, to perform their traditional monitoring and security activities.

U.S. authorities are concerned that innovative techniques can facilitate money laundering in the official financial sector and help criminals and terrorists conceal financial gains from illegal activities or hide money tied to terrorist organizations, the report said.

Federal Reserve Governor Susan Bies, who also spoke to the press, said the report "begins to give banks a better idea of what types of threats are out there."

Each chapter of the MLTA describes the characteristics of a specific method of money laundering, including alternative techniques such as casino- and trade-based laundering, according to a Treasury Department January 12 news release.  It also outlines the current legal and regulatory environment and present patterns of financial system abuses, their geographical concentrations and case studies.

The texts of the report (PDF, 81 pages) and news release can be viewed on the Treasury Department Web site."

For additional information on U.S. efforts to block funding for terrorism, see Terrorist Financing.

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site:

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