moving money without a trace new payment methods
TRANSCRIPT
MOVING MONEY WITHOUT A TRACE
New Payment Methods
Cash Banks MSBs
Traditional Payment Systems
4
New Payment Methods
Prepaid Cards
Open Closed
European Pin and Chip
PSVC Universe
Digital CurrenciesUsed to fund PSVCs
BanksIssue CardsHold Funds
SellersSell and fund PSVCs
Stores/Internet
InternetCard Registration and
activation. Purchase of cards, funding of cards,
access to digital currencies
DistributorsOrganize, Market, and
Distribute PSVCs
Program ManagersOperate and Run PSVC
Programs
Processing CompaniesCard account set up and
activation, card production, maintain databases of card
balances and transfers
ATM NetworksProvide 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 ManagersOperate and Run PSVC
Programs
Processing CompaniesCard account set up and
activation, card production, maintain databases of card
balances and transfers
Digital CurrenciesUsed to fund PSVCs
SellersSell and fund PSVCs
Stores/Internet
• 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
• 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
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
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
Online Payment Systems
• Facilitate e-commerce by providing a non-face-to-face settlement mechanism.
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.
Originator Beneficiary
Originator’sPayPal account
Beneficiary’sPayPal account
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
Terrorism Financing
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
• Considerably more complex value chain.• Advertised anonymity and instant settlement
important features of the system.
E-gold
Originator Beneficiary
Originator’se-gold account
Beneficiary’se-gold account
e-gold exchanger
e-gold exchanger
Bogus account info is the norm
E-gold
• E-gold was used to launder the proceeds of:–Child pornography.–Identity theft.–Bank fraud.–Ponzi schemes.–Illegal online drug sales.
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
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
Virtual Currencies
Bitcoin Market
The Armory
The Armory
Bitcoin Exchangers
New MSB Regulations
• Issued July 21st, 2011, effective September 19th
• New registration requirements – 6 months from July 21st
• 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)
Mobile Payments
Payment Tag:
Can be Prepaid Card
Mobile Payments
Phone as a Credit Card Terminal -Square
Phone as payment mechanism – M PayPal
ING Bump Payments
Square
Cards in Case
Newest Threat – Virtual Reality
Virtual Gaming Currencies
• Massive Multiplayer Online Role-Playing Game (MMORPG)– Entropia PEDs– Q coins– Linden dollars (Second Life)
Game Coins
Entropia Universe
Entropia Universe to operate real-world bank
with virtual world presence
Second Life
• First Person to make $1 million USD in Second Life
• Purchased and developed real estate
• Sells own line of clothing
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
On the Internet…
…nobody knows you’re a dog.
