Money laundering and credit cards

Credit cards are an unlikely way of laundering money, but they are growing in importance.  This will probably change the way in which credit cards are offered in the future.

A large amount of terrorist financing involves credit cards.  This is for two reasons, firstly it is easy to use credit cards to make payments and it is also easy for small and transient criminal gangs, like terrorist cells, to defraud credit cards.

Prepaid cards are a very easy thing for a terrorist to use to transfer money.  As a prepaid card, like any other credit card, can be used abroad automatically, then if a card is bought in one country it can be given to another person who lives in another place and then used to buy supplies.  Where banks have been regulated far more thoroughly, prepaid cards have developed into a way of taking money across borders with few checks.

Credit card fraud is also something that has been used by many small terrorist cells.  This is because it is quite lucrative and the transient nature of a terrorist cell is an advantage compared to other forms of larger scale fraud.  It also helps to cement any false identities as there are two or three other “proofs” of existence through the credit cards.

Some of the methods for combating credit card fraud have been stepped up by government bodies for this very reason.  One example is the growing international use of chip and pin.  This is when a card holder is forced to use a pin number when they want to use a credit card, and this cuts down the amount of credit card fraud considerably – by as much as 80% in the UK when it was made compulsory.

There has also been a growth in technology that specializes in analyzing transactions to look for either suspicious or out of character transaction on a credit card.

A credit card borrower should also regularly examine their statements.  This should be done not just for large transactions but also for small charges, as these are favored by fraudsters.

Credit cards are also increasingly popular with more orthodox criminal gangs as they can be paid off in cash and can transfer money into bank accounts (for example through gambling sites).

The very ease and convenience of credit cards has meant that they are popular tools for the criminal.  All this has meant that law enforcement bodies are looking at ways of making credit cards less anonymous, and this may mean that they will make them less convenient.