How Criminals Use Prepaid Cards
Prepaid Debit Cards are Becoming the Preferred Process to Move Funds

What Types of Criminals Use Prepaid Cards?

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, what you see isn’t always what you get.

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.

Card Cloning 101

Criminals can quickly create counterfeit payment cards, which are bought and sold online.

Last year alone, more than 32 million Americans were victims of credit card theft. Criminals skim card information from unknowing consumers or buy stolen credit and debit card numbers on the Dark Web. In many cases, criminals illegally clone valid payment cards onto non-descriptive pieces of plastic, like hotel room keys and subway cards, making detection and interrogation nearly impossible. Virtually any plastic card with a magnetic stripe can be re-purposed as a credit, debit or prepaid card. Unlike capturing bulk cash, when officers confiscate plastic cards, determining the identity and value of the card is critical to your investigation.

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.

Additional Resources
Padlocked credit card

ERAD-INS™

ERAD Issuer Notification Service

Solutions for Financial Institutions
ERAD-INS™ (Issuer Notification Service) is a unique solution that quickly notifies financial institutions when their credit, debit or prepaid cards are stolen and confiscated by law enforcement. This superior reporting service allows issuers to curb financial losses.
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Law enforcement officer using ERAD-FCIS solution

ERAD-FCIS™

ERAD Financial Crimes Intelligence System

Solutions for Law Enforcement Agencies
ERAD-FCIS™ (Financial Crimes Intelligence System) is a comprehensive investigative solution that allows law enforcement to inventory and analyze any plastic card confiscated during an arrest.
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Payment Card Fraud by the Numbers
The statistics paint a disturbing picture: Financial crimes are spreading like wildfire
Last year
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credit cards were stolen in the U.S.
Last year
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Americans were victims of identity theft.
Last year
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was laundered through identity theft fraud.
Each year, more than
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in funds from illegal and illicit activities are loaded onto prepaid cards.
Payment Card Fraud in the News
Payment card scams and schemes are making headlines across the nation.