No items in cart
View Cart

Money Laundering & the Gift Card Industry

By Mike Tchirkow | Published July 17, 2012 | Google+

When people think of the term ‘money laundering’, they often envision grandiose scenarios involving numerous parties with international ties, orchestrated by a sophisticated criminal organization. While these scenarios do occur, the majority of money laundering happens on a much smaller, more basic scale. Gift cards have become a popular method for laundering money due the very fact that they provide a basic avenue for cleaning dirty money. This brief article will explore the fundamentals of money laundering, how it is accomplished in the gift card industry, and lastly, how the industry is responding.

Money laundering is generally defined as engaging in acts designed to conceal or disguise the true origins of criminally derived proceeds so as to appear legitimate. This practice is not a new one; it has been occurring worldwide for over a century. What has changed, however, are the methods in which money laundering occurs.

There are three stages in the money laundering process. At the “placement” stage, cash generated from criminal activity is converted into monetary instruments. This is followed by the “layering” stage where the funds are transferred or moved into other accounts in order to further separate the money from its criminal origin. Lastly, at the “integration” stage the funds are reintroduced into the economy and used to purchase legitimate assets, or to fund other criminal activities.

The prepaid industry, specifically prepaid gift cards, is a current hotspot for money launderers. An open-loop gift card, or one that can be used at most merchant locations, can be purchased anonymously from just about any grocery store in the United States. Therefore, a money launderer can walk into a grocery store with $500 in cash and within minutes leave with one $500 open-loop gift card. Once the launderer has the gift card in hand, he is afforded a plethora of options on how to get the $500 off the card and back into cash form. Often times the launderer will purchase gift cards with gift cards prior to withdrawing any funds in order to further separate the money from its criminal origin.

Due to the increased threat of money laundering in the gift card industry, most card issuers have been forced to increase their efforts in deterring the practice. Companies like Giftcards.com have developed technology specifically designed to mitigate any money laundering activity occurring with their products.

In conclusion, as long as there are ways to move, store, or disperse money, the practice of money laundering will exist; and while society has evolved to combat it, it too evolves. We must stay one step ahead.

Top Insiders

Andrew McNelis
Social Media Manager
Industry Insider
Industry Insider
Carlos Tribino
CMO
Dan Wilkerson
Marketing & Web Analytics
Jay Scannell
COO
Jason Wolfe
CEO
Kyle Fulton
Systems Administrator
Marty Fisher
CTO
Mark Romanelli
VP of Products
Mike Tchirkow
Fraud Manager
Pattie Dillon
Director of Swap A Gift
Ryan Dew
Business Analyst
Shelley Hunter
Gift Card Girlfriend
Todd Anderson
General Counsel
Thomas Cribbs
Customer Service Director