Search

Editors

Harry Cassin Publisher and Editor

Andy Spalding Senior Editor

Jessica Tillipman Senior Editor

Richard L. Cassin Editor at Large

Elizabeth K. Spahn Editor Emeritus 

Cody Worthington Contributing Editor

Julie DiMauro Contributing Editor

Thomas Fox Contributing Editor

Marc Alain Bohn Contributing Editor

Bill Waite Contributing Editor

Shruti J. Shah Contributing Editor

Russell A. Stamets Contributing Editor

Richard Bistrong Contributing Editor 

Eric Carlson Contributing Editor

Bill Steinman Contributing Editor

Aarti Maharaj Contributing Editor


FCPA Blog Daily News

« Creating an African alliance, enforcing our bribery laws | Main | A compliance response to Zhou’s shocking downfall »
Wednesday
Aug062014

MoneyPak prepaid cards lure fraudsters, money launderers

Federal authorities are investigating a wide range of fraudulent schemes involving a popular prepaid money card product called MoneyPak that lures consumers into sending money through the card.

Thousands of consumers have sent money through MoneyPak, and online fraudsters have used the card to launder small sums of cash, because money transfers using the cards are hard to track, the New York Times reported last Thursday.

The abuses are mounting as prepaid cards are attractive to Americans who don’t have access to a traditional bank account or credit card. Consumers also use the cards to transfer money into PayPal accounts to shop online.

The U.S. Justice Department has issued "Scam Alerts" to warn consumers about the ways fraudsters use MoneyPak cards to prey on unsuspecting card owners.

The schemers that use MoneyPak often pose as bill collectors, bail bondsmen, government officials or sales agents in emails, online ads or phone calls. The FBI has issued alerts about schemes involving a MoneyPak to the public.

This abuse of MoneyPak, a perfectly legal prepaid card, has created a problem for its seller, Green Dot.  

A Pasadena, Calif., bank holding company, Green Dot says it now has a technological answer to address the worst of the illegal uses. A new electronic cash-transfer system it is installing in most of the 92,000 retail stores that sell its products will ultimately replace the MoneyPak altogether, the NY Times quotes the company as saying.

Consumer advocates and some in law enforcement still question whether the technological fix will work, and if it will just mean that scammers will find work-arounds.

In most cases, the victim is directed to go to a big retailer that sells prepaid cards and buy a MoneyPak, and then have the cashier put as much as $500 on the card. The victim then is typically instructed to email the unique 14-digit access code on the back of each MoneyPak.

With that code, anyone can "unlock" the card and transfer the money to another prepaid debit card either by going online or by calling an automated Green Dot phone line.

To address this problem, GreenDot says it expects that by early next year, most stores will be able to let consumers add money directly onto an existing prepaid card by swiping the card through a machine connected to a Green Dot data-processing center.

The new system is already in place in Walmart stores, which sell Green Dot products, and it will soon render obsolete the kind of access codes presently on the back of every MoneyPak card. 

The Consumer Financial Protection Bureau (CFPB) announced potential disclosures the Bureau might propose to be used on the packaging of prepaid cards as part of a larger project that will provide a variety of protections for prepaid card users.

And in June, the CFPB began taking consumer complaints about their concerns about prepaid cards, include gift cards, benefit cards and debit-type general purpose reloadable cards.

Regulators and consumer advocates say the true figure is probably much higher since many victims do not report being ripped off because of the difficulty in prosecuting such cases and the embarrassment of being duped, the NY Times noted.

__

Julie DiMauro is the executive editor of FCPA Blog and can be reached here.