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Financial crime is growing

Prepaid cards are the new currency of criminals.


The payment card
fraud epidemic

Payment card fraud is a driving force behind money laundering,
sex trafficking and widespread crime.

Payment card fraud is running rampant across the United States. Criminals who once made a living selling narcotics and handling stolen goods have discovered that stealing credit cards and laundering money with prepaid cards is an easier, more lucrative and low-risk business. Plastic cards have become the preferred method for moving illegal funds.

“Prepaid cards are the currency of
criminals. Our problem is you can’t
distinguish the number of prepaid card
from a legitimate bank account.”

John Koskinen
IRS Commissioner

Criminals skim card information from unknowing consumers or buy stolen credit and debit card numbers on the Dark Web. They then transfer this info to other plastic cards, such as hotel room keys or even legitimate credit and bank debit cards. This makes detection and interrogation nearly impossible. Without the proper tools to investigate and confiscate the funds from these plastic cards, criminals keep the money from prepaid cards and continue their illicit operations.

That’s where ERAD™ has got you covered. Our revolutionary technology
is giving payment card fraud a run for its money.

The statistics paint a disturbing picture.

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$32 million last year

in credit cards were stolen in the U.S.

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$40+ billion a year

in funds from illegal and illicit activities
are loaded onto prepaid cards.

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500 million people

were victims of identify theft last year.

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$16 billion last year

was laundered through identity theft fraud.

Criminal Types

A variety of criminals are using stolen credit, debit and prepaid cards to move
billions of dollars in, out, and around the country.

Drug cartels

Payment cards are skyrocketing in popularity with drug cartels moving massive amounts of money. Unlike cash, it's not about the number of cards—it's about how much money is stored on each card. Because there's virtually no operational limit to the amount of money that can be loaded on a prepaid card, any one piece of plastic could have hundreds or even thousands of dollars on it.

Organized crime

According to the FBI, transnational organized crime groups continue to pose a serious threat to the national and economic security of the United States. Because handling bulk cash is often far too risky, these groups are increasingly using plastic cards as safer and easier way to move funds.

Terrorists

France recently announced it would target prepaid debit cards, which were used in the Paris attacks. “We will regulate more strictly the use of prepaid cards, which were used in the November 13 attacks, in order to make it harder to remain anonymous.” - Finance Minister Michel Sapin.

Gang activity

The FBI estimates there are 33,000 violent street gangs, motorcycle gangs and prison gangs with about 1.4 million members active across the U.S. and Puerto Rico today. Many of these gangs are well-organized and sophisticated, and use plastic cards as their primary currency.

Human traffickers

According to some estimates, more than billions of dollars are loaded on prepaid cards from criminal activities, including human trafficking. Human traffickers are drawn to plastic cards because they are a safe, easy and low-risk way to move funds in and out of the country.

Sex traffickers

One of world’s fastest growing criminal enterprises, sex trafficking is a lucrative industry, raking in approximately $99 billion a year. The International Labor Organization estimates there are 4.5 million people trapped in forced sexual exploitation across the globe. Like other criminals, sex traffickers are increasingly relying on plastic cards to move funds in and out of the United States.

How criminals use
prepaid cards

When it comes to plastic cards, looks can be deceiving. In many cases, these seemingly harmless-looking cards are being used to launder money tied to illegal or illicit activities. Criminals are increasingly using stolen credit and debit cards, and prepaid cards to move funds in, out and around the country.

How criminals acquire prepaid cards +

Many criminals purchase stolen debit and credit card numbers on the Dark Web or skim them at merchant locations. Once in their possession, they can then be used to purchase prepaid and gift cards.

How criminals use prepaid cards +

First, criminal organizations will contact a complicit supplier of prepaid cards. In some cases, the supplier loads the cards with illicit funds in any currency. Next, the supplier ships the prepaid cards, loaded or unloaded, via mail or courier. In the destination country, the recipient withdraws the cash at an ATM, which is then converted into local currency. As soon as the cards are “unloaded,” they can be used for subsequent illegal transactions.

About prepaid cash cards +

Often referred to as “open loop” cards, these global cash cards are branded by Visa, MC, Amex, Discover and globally issued by financial institutions. The prepaid card works like other debit cards, allowing users to buy goods and services anywhere in the world—making these true “global cash cards.” They can also withdraw cash from branded ATMs with the correct PIN.

Although some are used only once, prepaid cards can be re-loaded with cash at more than 150,000 merchant locations in the U.S., or through online transfers from bank accounts or other payment cards. Funds can be transferred to other prepaid cards anywhere in the world in a matter of seconds using online applications or mobile phones.

About retailer gift cards +

Also known as “closed loop” cards, these gift cards are branded by retailers for use only at their stores. Consumers can use the cards like cash to buy goods and services at certain merchant locations. Retailer gift cards are purchased for a specific amount and can only be re-loaded by the merchant. Funds cannot be transferred from these cards to other payment cards.

Cashing out and/or buying gift cards +

In pawn shops, gift cards are often sold for cash at 50 to 70% of the face value. Home Depot, Target, Best Buy and Walmart cards are among the most popular gift card brands used for money laundering. With more than 2,200 Walmart stores in Mexico, buying a Walmart gift card is fast and easy for criminals looking to move illegal funds.

How card cloning works +

Criminals use easily accessible re-coding devices to copy stolen personal identity and financial information and transfer it to any card with a magnetic stripe. For just dollars an account, offenders can buy credit, debit and prepaid card information on the Dark Web. Some use “table top” embossing machines to alter the face of the card to match information on the magnetic strip. The bottom line is any plastic card with a magnetic stripe can contain cloned credit, debit or prepaid card information.

Challenges faced by law enforcement

It’s difficult for officers to distinguish a legitimate card from one tied to illegal activities.

When it comes to payment card fraud, it often seems like law enforcement officers are fighting an uphill battle. With billions of dollars loaded on prepaid cards from narcotics, human smuggling, sex trafficking and terrorist funding, it’s obvious that modern day criminals are drawn to these plastic cards—and the numbers continue to skyrocket.

01

Easily concealed

Criminals can easily conceal stolen
identities and cloned financial card
information on a magnetic stripe.

02

Hard to collect

Securing intelligence from payment cards
obtained during an arrest is extremely
difficult.

03

Difficult to protect funds

It’s extremely challenging to protect funds attached to a prepaid card. It can take weeks or months to accomplish, if ever.

04

Time consuming

It takes law enforcement countless hours to gather information, document the findings and put it in a consistent format prosecutors and judges can use.

05

Tough to notify financial institutions

Financial Institutions are losing billions of dollars each year from stolen cards. Yet, there is no quick and easy way to notify these intuitions when a law enforcement officer confiscates a stolen card—until now.

“Lawrenceville Police Department confiscates 1,471 cards including $34,000 from prepaid cards”

October 2018 • Lawrenceville Police Department

Case Studies

“Pascagoula Mississippi uses ERAD to I.D. stolen debit cards and recover over $7,000 from prepaid cards”

October 2018 • Pascagoula Police Department

Case Studies

Challenges faced by financial institutions

Financial institutions are losing billions of dollars thanks to the growing epidemic.

The longer it takes for a financial institution to discover an account has been compromised, the more exposed that organization becomes. With average cloned card losses estimated at $3,500 per card, it doesn’t take many stolen cards to chip away at your bottom line. Early detection and reporting is a key strategy to reduce your institution’s stolen card fraud losses and improve cardholder satisfaction.

01

Challenge One

Payment card theft and fraud is running rampant across the nation, with nearly 32 million credit cards stolen in the U.S. last year and more than $40 billion laundered on prepaid cards.

02

Challenge Two

By 2020, financial institutions will lose as much as $50 billion tied to stolen credit and debit cards.

03

Challenge Three

Chip cards have not helped to curtail this fraud outbreak. The number of payment cards compromised at U.S. ATMs and merchants actually increased by 70% last year.

04

Challenge Four

In the midst of this fraud epidemic, financial institutions are struggling to protect their customers, their bottom lines and their reputations.