Co-op launch first pre-paid currency card » Business » This Is Jersey.
As the Jersey Evening Post reports:
THE first pre-paid payment card to be issued in Jersey will be launched by the Channel Islands Co-operative Society this month.
The card is the same as a credit card but without the credit. You load it with funds as required and top it up as necessary.
It can be used anywhere in the world where the MasterCard sign is displayed, including cash machines, internet and telephones.
The Co-op is to issue it through its Travelmaker division and it is expected to be popular with Islanders travelling overseas.
The Co-op’s financial services manager Trevor Moore said that there were many benefits of using a pre-paid card, regardless of financial status.
Yes. Money laundering and tax evasion are two of them.
On this occasion, shame on the Co-op unless it has put the most rigorous of controls on the issue of these wholly unnecessary cards.
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How does this differ from a cheque book (apart from the convenience and low cost)?
@Alex
Let’s try total anonymity for the user, shall we?
Following the UK’s lead (where these cards are already being issued by major organisations) is a mistake. I don’t remember seeing Richard writing articles about the UK cards in issue re their money laundering credentials etc…any reason? Perhaps you would confirm your position on this? Is it just prepaid cards in Jersey you are against or prepaid cards in general and irrespective of where they are issued and used?
@JohnBuckles
I have written about the problem of these cards many times before
I oppose them wherever issued
But especially from locations with lax controls over laundered funds – like Jersey – where tax evaded funds are routinely ignored as evaded
@Richard Murphy
A card that clears through the Mastercard system? How is that more anonymous than a credit card issued by a bank? Certainly much less anonymous than cash, and given the usual low annual payment limits (£10,000 is a typical annual limit) this is hardly going to fund a lavish lifestyle for major criminals.
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I was about to post the same as JohnBuckles but then read this article on prepaid cards http://tinyurl.com/36t46z2.
I do think that such cards have a genuine use and need ( as mentioned here by Which http://tinyurl.com/337yk6s ), if there are adequate safeguards and tracing.
@Richard Murphy
How does this square with the Data Protection Act?
These cards seem no different to any other debit or credit card. The people issuing them must be properly regulated but that is another argument.
The cards themselves enable people who are not used to credit and have limited money available can use these without getting themselves in debt. They also ensure that you set a specific limit on how much you can spend when travelling abroad rather than a broad credit limit on your credit card or the cash balance in your bank accounts.
Cash money laundering happens in your home town with small businesses passing off this cash as daily takings. Nobody takes case loads of money to an offshore island and opens a bank account.
Look around your home town and see small business owners with big houses and high lifestyle. That is where drug money is laundered.
As for the real money laundering by tax evaders etc. (the rich and the famous) I don’t think you will see any football stars carrying these cards! They have black Amex etc.!!!!
How is this more anonymous than cash transactions? The limits of how much you can store on the card and daily limits would make these cards unattractive for money laundering anyway.
@Michael Hardy
I think you’re ignoring several things when making your comments
First is the fact that these are not normal debit or credit cards: those have a trail back to the person who holds the account
A prepaid card once issued is not like that: it can be bought in one name, very easily, and passed to another person for use using a PIN number with ease. These cards are, in effect, bearer warrant. These have always been subject to considerable abuse
Second, they’re not like cash. That is hard to move. These cards are easy to move
Third, they add another layer into turning illicit cash into licit money
Fourth, you ignore the fact that £10,000 is plenty enough cash to evade for tax if you know you can bring it back with ease to spend – and candidly I can’t see Jersey batting an eyelid to this happening
Just once a year by a significant number of people and the impact on tax take could be material
But more than that – I can think of no legitimate reason on earth why anyone needs one of these cards
Bluntly I see them as tools for evasion, and that’s it
Can I ask my company to reduce my salary to the minimum state pension limit and offer me a few of those gift cards as performance reward?
@Richard Murphy
“But more than that – I can think of no legitimate reason on earth why anyone needs one of these cards”
Well, let me do some thinking for you:
1. They are a substitute for travellers cheques or cash, but are protected by a PIN code, so that unlike cash (or some travellers cheques), if the card is lost the card can be cancelled and the economic value remains in the account. NB: the Co-op card is issued jointly with Thomas Cook. That gives a little clue as to their intended use.
2. They are available to people whose credit rating does not allow them to have access to a debit or credit card.
3. They are available to children over the age of 13. One of my friends gives one to each of her sons who are away at boarding school, which seems to be a very practical solution.
@Alex
I seriously wonder if boarding schools were invented as a cover for tax abuse, so often have I heard them used to defend structures only having any apparent real use for tax abuse. So candidly I’ll ignore the absurdity of that comment – and suggest the bursar find alternative arrangements, as at one time he or she no doubt did
I travel the world, often. Is there any need anywhere for travellers cheques? If you can use a debit card then clearly there is none. And you can have such a card on your own account.
So all that is left is the issue of social exclusion. These people don’t have cash to front load these cards
So you have made no case at all
There is one real use – and a lot of excuses
“I seriously wonder if boarding schools were invented as a cover for tax abuse, so often have I heard them used to defend structures only having any apparent real use for tax abuse.”
My kids’ school pre-dates income tax in this country by nearly 1200 years, so I doubt tax figured anywhere in the motive for setting them up. Very unlikely.
Alex is right – it is a very convenient way for kids to pay, especially if they are away from home for extended periods such as boarding school. It is like cash, but more secure (ie can be recovered if it is lost) and parents can control expenditure. And it allows kids to buy online. The bursar has better things to do than worry about this.
This company http://www.splashplastic.com/ has been around for a decade or so, and kids are significant customers. As far as I know, a successful company and a good idea.
@Richard Murphy
If you can get a credit card from a bank then you don’t need a prepaid cash card, but there is essentially no difference from a merchant’s point of view (or with regard to anonymity). The only difference is seen from the issuing bank’s point of view that they will allow drawings against a prepaid card (much like purchased travellers cheques) rather than paying out to the merchant against a bank account or credit line.
As a tool for money laundering or tax evasion they are pretty useless. After all a year’s spending limit would scarcely cover one term’s school fees.
@Richard Murphy
And what if someone prefers not to use a debit card because of the security aspect? A gap year student for example?
Maybe the card can be used for money laundering and tax evasion purposes, but there are certainly and equally other ways to like the use of bank accounts, debit cards and credit cards. What about gold coins, fine wine, antiques.
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@Adrian
I think you prove my point
Trusts
pre-paid credit cards
Offshore itself
All invented for apparently legitimate reasons by those with more money than sense
And now conduits for crime
Do you detect a pattern?
@Justin
If you could translate your comment into something that makes sense I’ll see if I can respond
“I can think of no legitimate reason on earth why anyone needs one of these cards”
As someone whose debit card was cloned abroad and who is still fighting to recover the balance of over £12,000 of fraudulent expenditure, I find the idea of having a card with a fixed amount of credit on it very appealing.
Nothing at all to do with tax.
Richard, there will be the same disclosure and reporting limits (ie £10K) for depositing money on to these cards as there is with any financial transaction.
@Greg
But there is no control at all on who the bearer account is then passed on to
Come on – this is pretty basic AML stuff
“And now conduits for crime
Do you detect a pattern?”
No, not really and am not sure I understand your reply.
These cards are a substitute for cash with the same anonymity but with more security and usability for internet purchases. Really good for parents to ensure their kids have enough money in their pockets but without risk of loss.
Although cash can be used for illegal purposes, the vast, vast majority of people do not. Is there any reason to think any different with these cards?
Some people use all kinds of ordinary things as ‘conduits of crime’ – cars, pubs, park benches, their own lounge rooms, computers and telephones. It’s not particularly convincing to blame the thing itself or to outlaw them for the benefit of the majority who use these things properly.
Richard, you may be right that the benefits of such cards are not big enough to balance the fact that they add one more easy route to laundered money and tax evasion. But when people tell you that they find such cards convenient in situations that do not involve tax evasion or money laundering, they may tell the truth. I for one have used such a card for a few months thirty years ago when back packing the US. I found it very convenient. You reduce the value of this blog if you ridicule people for finding something convenient. But again, you are probably right that today such bearer bonds made of plastic are too convenient for the wrong kind of people, and me loosing the convenience I got from them is a small price to pay.
@Adrian
1) Crass commentary gets you nowhere
2) Try http://www.alaric.com/prepaid_card_fraud.html and even http://www.alaric.com/prepaid_card_fraud.html plus http://www.philadelphiafed.org/payment-cards-center/publications/discussion-papers/2007/D2007FebPrepaidCardsandMoneyLaundering.pdf. I don’t make this stuff up
3) Your example – absurd as it is to most people whose kids don’t wallow around with significant sums in their pockets – is no evidence of lask of abuse
I repeat – these cards have in my opinion no reasonable use except for the parents of children with too much pocket money and for crime and so far none of you have come up with another one
@Gaute
There is a problem that a) many comments people make on this blog are crass even when they get through moderation (and a a lot don’t) b) many commentators here are politically motivated to support abuse. I tend to be intolerant as a result
Your analysis on why these cards cannot be tolerated is correct
And your thirty year old experience is also, respectfully out of date now
Car protections are much better now
Although curiously stolen cards are now often used to top up anonymous pre-paid cards
But Richard where is the difference between this and a normal credit card? I could easily pass my credit card on to someone else, and give them my PIN in exchange for them paying the bill in cash at the bank each month. To get the Co-op card, you will have to provide the same personal info that you would to apply for a card normally.
@Greg
You could
But there’s no evidence people do
There is evidence of such abuse of pre-paid cards
Shall we stay in the world of evidence?
Well let’s wait and see if the Co-op insist on the usual KYC for these cards.
I see that the Co-op offer Christian Aid credit cards. Let’s hope they don’t offer pre-paid ones!
There is of course plenty of evidence to the contrary. The articles you quote indicate that the market for such cards runs into the hundreds of billions and they do not claim that all of this is for nefarious purposes.
They also conjecture that after stealing a credit card they could use it load a prepaid card, which they would sell for cash. They do not explain why anyone would do this rather than withdrawing the same undiscounted value of cash from an ATM.
More importantly they do suggest that banks should limit the amount that can be paid into and out of a card account, which is exactly what most banks seem to do.
FRom your first referenced article:
“To combat fraud and money laundering institutions, retailers and payment networks need to introduce systems which can monitor key parameters and alert or block prepaid card usage. At a simplistic level, typical parameters which need to be monitored include
* Number of accounts/cards per customer
* Number of card loads per day
* Number of account loads daily and over time
* Number of account loads on a card at the same location”
The cards are not a new phenomena. It seems the worst exposure to these cards, is the company issuing them. They are easy to steal.
I suggest to you that diamonds are a much easier way of transferring assets accross borders in any meaningful quantities.
The drug dealer who may spend his time swapping his illicit gains into paid cards is surely small fry and can easily be detected by the issuing entity.
@Michael Hardy
The theory is sound
As yet almost no regulator anywhere has looked at the application of theoretical controls to practice – he IMF included
That’s what worries me
Thought this might be a relevant read as well ❗ :
Tax evasion a major reason behind CGT rise
MPs clashed in Westminster on Wednesday over the role of accountants’ advice to freelancers in tax evasion cases.
Freelancers tax evasion
John Pugh, the Lib Dem MP for Southport, accused accountants of giving tax avoidance advice to clients. This accusation was challenged by the Tory MP for Amber Valley, Nigel Mills. Mills is a chartered accountant and prior to the election he worked as a tax adviser. He quickly reassured the House that he did not hand out tax avoidance advice.
Read more here : http://www.freelancesupermarket.com/news/2010/6/18/tax-evasion-a-major-reason-behind-cgt-rise.aspx
@ Richard Murphy
There is a perfectly good reason for prepay cards: it’s called exchange rates.
I spend £150 and buy 200 Euros to put on my card and I know I have 200 Euros. I take my account card abroad and spend it (if my bank will let me: it’s now at the stage where I have to tell them I’m going for the card to be usable) and spend 200 Euros. I have not the slightest idea what will hit my bank statement, because the banks will not be transparent and tell me what exchange rate they are using and what extra admin charges they are levying.
I’ve had enough of being defrauded and messed around by bankers, and I fully intend to use a Euro prepay card next time I travel to France.