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Cash card draws caveats

The product is sold as an easy way to transfer funds. Federal officials fear it can be used to launder money.

By IVAN PENN
Published October 3, 2006


First the good news: Now you can send money to your loved one any time and anywhere in the world.

Want to send cash to your child studying in Spain, or maybe to an elderly relative across the country?

Just buy the MiCash card at a Home Depot in the Tampa Bay or Washington, D.C., areas (cash only), load it with funds (up to $2,999) and mail a companion card to whomever you want.

They can use the card at an ATM. No picture ID required. No need to identify the recipient.

Now the bad news: U.S. law enforcement sees such cards as tools that could undermine their crime-fighting, particularly in their efforts to thwart money-laundering schemes and the funding of terrorist organizations.

“A lot of what we do is based upon a paper trail,” said John Joyce, special agent in-charge of the Secret Service’s Tampa office. “It’s a good way to launder funds without having a paper trail.”

Added U.S. Treasury Department spokeswoman Molly Millerwise: “The Treasury has recognized emerging industries, notably stored value cards, as being vulnerable to illicit financial activities, including money laundering.”

Unlike many gift cards, which might reach denominations of at most a few hundred dollars that would be inefficient for money launderers, the MiCash card allows its customers to handle sums in the thousands. And it can be used over and over.

Javier Palomarez, chief marketing officer for MiCash Inc., a Washington, D.C.-based firm, said that when someone activates the card over the phone, the company requires a name, birth date and Social Security number or “matricula consular” (an ID issued by foreign countries).

“We do credit background checks, just as a bank would,” Palomarez said. “It isn’t as though this is an anonymous card.”

Mario de Armas, senior manager of Home Depot credit services, said the home improvement giant also has implemented security measures for the card to thwart illegal activity. “We’re trying to make this very uncomfortable … for folks trying to launder money,” de Armas said.

MiCash began distributing its card through Home Depot in May as part of a 12-month pilot program. The test market includes 28 stores in the Washington area and 30 throughout Tampa Bay.

Home Depot limits customers to two MiCash packages, although without a photo ID requirement, creative consumers can skirt that rule.

On a visit to a St. Petersburg Home Depot for this story, a reporter purchased the two-card set of MiCash cards and was told that the retailer requires cash to purchase the $4.95 package and to load it.

No identification was required.

Upon contacting the activation number, a customer service representative said he would need a name, address, phone number and Social Security number. Again, no photo I.D. required.

In the “U.S. Money Laundering Threat Assessment,’’ a report released this year, the U.S. departments of the Treasury, Justice and Homeland Security highlighted concerns about the stored valued cards, saying:

“Programs that lack customer identification procedures and systems to monitor transactions for suspicious activity present significant money laundering vulnerabilities, particularly if there are liberal limits or no limits on the amount of cash that can be prepaid into the card account or accessed through ATMs.”

The stored value cards target the growing market of remittances, the money migrants send to their families outside the country. The White House reported in 2004 that remittances had grown to more than $32-billion annually in the Western Hemisphere.

The MiCash card can be “loaded” with cash and reloaded daily. The daily limits are $2,999 for the card balance; $999 for loads; and up to $800 for purchases, ATM withdrawals and wire transfers.

The card carries several transaction fees, including $7.95 to load cash on it; a $3 transfer from card fee; and a $2 dormant card monthly fee.

Ezra Levine, a Washington lawyer who represents the wire transfer industry, said he questions the limits on the MiCash, which he believes are higher than other prepaid debit cards. High limits make the cards more attractive to those who would use them for illegal activities.

“One thing I find suspect is the limit of $2,999,’’ Levine said.

In the money laundering threat assessment, federal officials stated that MasterCard International and Visa USA have suggested there be guidelines for companies issuing the stored value cards, including account limits and requirements to verify identification.

Palomarez, the MiCash official, said his company’s card is part of one of the biggest trends in purchases and transferring money.

Stored value cards can be found in various forms at retail outlets, most often as gift cards.

 Palomarez did not name a particular group when asked who the company was targeting with its product. He said everyone from immigrants to military families have been using it.

Much of the information on the card is in Spanish, including a sticker with the instructions for activating the card.

That information does not appear in English on the card itself.

When the card is used, customers can receive a text message on their cell phones . Customers can receive their payroll checks as a wire transfer directly to their cards.

Palomarez said one state government that he would not name is considering using MiCash to distribute social service benefits and eliminate issuing paper checks.

“I think the customers are thumbing their noses at the traditional financial institutions,” Palomarez said.

Home Depot’s de Armas said it brings Home Depot to the cutting edge of an arena that other retailers have dominated with use of Western Union.

“The stored value card is new. It’s a dynamic technology,” de Armas said. “We’re always trying to provide better benefits and services to our customers.”

Ivan Penn covers consumer affairs issues and can be reached at ipenn@sptimes.com or (727) 892-2332.

[Last modified October 3, 2006, 22:36:30]


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