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MOVING MONEY WITHOUT A TRACE New Payment Methods.

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Presentation on theme: "MOVING MONEY WITHOUT A TRACE New Payment Methods."— Presentation transcript:

1 MOVING MONEY WITHOUT A TRACE New Payment Methods

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3 CashBanksMSBs Traditional Payment Systems

4 4 New Payment Methods

5 Prepaid Cards Open Closed European Pin and Chip

6 PSVC Universe Digital Currencies Used to fund PSVCs Banks Issue Cards Hold Funds Sellers Sell and fund PSVCs Stores/Internet Internet Card Registration and activation. Purchase of cards, funding of cards, access to digital currencies Distributors Organize, Market, and Distribute PSVCs Program Managers Operate and Run PSVC Programs Processing Companies Card account set up and activation, card production, maintain databases of card balances and transfers ATM Networks Provide direct access to funds (Plus, Cirrus, Star, Maestro, etc.) Prepaid Stored Value Cards Branded Card Payments Networks (Visa, MasterCard, American Express, etc.) Branded Card Payments Networks (Visa, MasterCard, American Express, etc.) Program Managers Operate and Run PSVC Programs Processing Companies Card account set up and activation, card production, maintain databases of card balances and transfers Digital Currencies Used to fund PSVCs Sellers Sell and fund PSVCs Stores/Internet

7 Final Rule Issued July 26, 2011 –Change of Terms: Prepaid access –Providers of Prepaid access Determined by contractual agreement –Require Registration of Provider of Prepaid Access –Require Customer Identification Programs Evolving Safeguards

8 Final Rule Issued July 26, 2011 –Require SARS from Providers –Sellers covered if sell products greater than $10k on any one day –Closed looped exempted – sold in amounts less than $2K –Cross Border Reporting – Requires Regulatory Fix new definition to be added to monetary instruments new NPRM Evolving Safeguards

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11 Sallie Wamsley-Saxon Sallie Wamsley-Saxon ran Charlotte, NC-based prostitution ring with her husband Charged up to $700/hour Sallie and her husband took 30% Each had 5 prepaid cards in their names with a $2500 load limit, so they could load $25,000 at a time without a CTR being filed

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13 Identifying Stored Value Cards Problem: –Open System cards look and operate just like bank ATM cards so they can be difficult to identify –Open System cards do not have to be branded

14 Online Payment Systems Facilitate e-commerce by providing a non-face-to- face settlement mechanism.

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16 PayPal PayPal is the largest online payment system, with $60 billion worth of transactions in 2008. PayPal is registered and licensed as a money transmitter. It has an AML program and reporting requirements. OriginatorBeneficiary Originators PayPal account Beneficiarys PayPal account

17 Introducing Financial Investigations Digital Currency Internet-based service providers that use gold, silver, platinum, and palladium as the store of value Digital Exchange Services act as intermediaries, accepting payment and transacting with digital currency providers Used for speculation in commodities, person-to-person payments, commercial payments

18 Terrorism Financing

19 Cyber-Jihadis Younes Tsouli, Tariq Al-Daour and Waseem Mughal Convicted in UK of: Inciting Terrorist murder via internet, Conspiracy to defraud banks, credit companies 37,000 stolen credit card numbers £1.8 million in fraudulent transactions Set up Web sites & communication sites

20 Considerably more complex value chain. Advertised anonymity and instant settlement important features of the system. E-gold OriginatorBeneficiary Originators e-gold account Beneficiarys e-gold account e-gold exchanger

21 Bogus account info is the norm

22 E-gold E-gold was used to launder the proceeds of: –Child pornography. –Identity theft. –Bank fraud. –Ponzi schemes. –Illegal online drug sales.

23 RBS WorldPay RBS WorldPay – U.S. payment processing arm of The Royal Bank of Scotland – announced in Dec 08 that its systems had been hacked. –1.5 million prepaid cardholders info stolen. –Withdrawal limits reset on ~100 payroll cards. Gang of hackers – 5 Estonians, 1 Russian, 1 Moldovan

24 RBS WorldPay Network of cashers supplied with 44 counterfeit payroll prepaid cards 2100+ ATMs in 280 cities ~$9 million withdrawn in less than 12 hours Money moved from cards to WebMoney, a digital currency

25 Virtual Currencies

26 Bitcoin Market

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29 The Armory

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31 Bitcoin Exchangers

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33 New MSB Regulations Issued July 21 st, 2011, effective September 19 th New registration requirements – 6 months from July 21 st Prior to this rulemaking, the regulatory definition of MSB covered [e]ach agent, agency, branch or office within the United States of any person doing business, whether or not on a regular basis or as an organized business concern New Rule: A person wherever located doing business, whether or not on a regular basis or as an organized or licensed business concern, wholly or in substantial part within the United States 31 CRF 1010.100 (ff)

34 Mobile Payments

35 Payment Tag: Can be Prepaid Card

36 Mobile Payments Phone as a Credit Card Terminal -Square Phone as payment mechanism – M PayPal ING Bump Payments

37 Square Cards in Case

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41 Newest Threat – Virtual Reality

42 Virtual Gaming Currencies Massive Multiplayer Online Role-Playing Game (MMORPG) –Entropia PEDs –Q coins –Linden dollars (Second Life)

43 Game Coins

44 Entropia Universe Entropia Universe to operate real-world bank with virtual world presence

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46 Second Life

47 First Person to make $1 million USD in Second Life Purchased and developed real estate Sells own line of clothing

48 Virtual-bank scam leaves depositors with real loss The 33-year-old from Chicago, who played the game as a raven- haired Vixen called ZaniaTurner, deposited $140 in Ginko Financial and waited for the money to grow. Instead, it vanished five months ago when Ginko, perhaps the first Ponzi scheme in history perpetrated by three-dimensional online avatars, left Second Life. LA Times 1/28/2008

49 On the Internet… …nobody knows youre a dog.

50 Susan L. Smith Asset Forfeiture and Money Laundering Section 202/514-1434 or 1263 Susan.Smith2@usdoj.gov


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