Australian Institute of Criminology

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Popular store and gift cards present new opportunities for money laundering

Media Release

30 September 2008

Stored value cards (SVCs) offer new opportunities for illicit financial transactions, money laundering and bulk cash smuggling by organised criminals, according to a paper released today by the Australian Institute of Criminology (AIC).

'Money laundering risks of prepaid stored value cards', number 363 in the AIC's Trends & Issues in crime and criminal justice series, highlights some of the ways that increasingly popular stored value cards can be used to disguise criminal transactions.

"There are various types of SVCs, from limited value cards which can be used at limited vendors, to cards with a large amount of value attached to them, redeemable at numerous merchants and service providers," said Dr Judy Putt, General Manager Research at the AIC. "Each sort of card can be used in money laundering operations."

According to the paper, each stage of the money laundering process provides a potential role for the use of SVCs:

  • placement - illegal funds are introduced into the financial system, or converted into monetary instruments (for example, SVCs)
  • layering - the illegal origins of funds are disguised (depending on the type of SVC used during the placement stage, value can either be redeemed for merchandise or sent overseas)
  • integration - disguised funds are made available for investment in legitimate or illegitimate businesses (SVCs can be used as a means of payment by criminals. Eg, the chemicals used in the production of illegal drugs could be bought using SVCs).

"In the same way that legitimate businesses look at market forces and new opportunities for SVCs, criminals will also explore new areas that can be exploited to maximise profits, and evade the scrutiny of law enforcement agencies and regulators," Dr Putt said.

"The widespread availability of SVCs (particularly at non-financial outlets), the high credit limits of some types of cards, and the fact that in many cases customers need not prove their identity to obtain SVCs, can all be abused by organised criminals for illicit financial transactions and to disguise their activities."

Media contact: Lani Gerrish, Tel: 02.6260 9273; 0403 746 009; aic.media@aic.gov.au