By using The credit card industry includes: case study
Credit card associations, such as American Express,MasterCard and Visa, which license member banks toissue bankcards,
authorize merchants to accept thosecards, or bothIssuing banks, which solicit potential customers and issue the credit
cards.Acquiring banks, which process transactions for merchants who accept credit cards.
Third-party processors, which contract with issuing or acquiring banks to provide transaction processing andother credit
card–related services for the banks.Credit card accounts are not likely to be used in the initialplacement stage of money
laundering because the industrygenerally restricts cash payments. They are more likely to be usedin the layering or
Compiled by Srinivas Kante
Email: srinivaskante4u@gmail.com Special Thanks to Mr.Aravind Sankar
12
12
integration stages.
Example
Money launderer Josh prepays his credit card using illicit funds that he has already introduced into thebanking system,
creating a credit balance on his account. Josh then requests a credit refund, whichenables him to further obscure the origin of
the funds, which constitutes layering. Josh then uses the illicitmoney he placed in his bank account and the creditcard refund
to pay for a new kitchen that he bought.Through these steps he has integrated his illicit fundsinto the financial system.
A money launderer could put ill-gotten funds in accounts at banksoffshore and then access these funds using credit
and debitcards associated with the offshore account. Alternatively, he couldsmuggle the cash out of one country
into an offshore jurisdictionwith lax regulatory oversight, place the cash in offshore banks and— again — access
the illicit funds using credit or debit cards.In a 2002 Report called “Extent of Money Laundering throughCredit
Cards Is Unknown,” the U.S. Government AccountabilityOffice, the Congressional watchdog of the United States,
offered hypothetical money laundering scenarios using credit cards. One
example was: “[Money launderers establish a legitimate businessin the U.S. as a ‘front’ for their illicit activity.
They establish a bank account with a U.S.-based bank and obtain credit cards and ATM cards under the name of
the ‘front business.’ Funds from theirillicit activities are deposited into the bank account in the United States.
While in another country, where their U.S.-based bank hasaffiliates, they make withdrawals from their U.S. bank
account,using credit cards and ATM cards. Money is deposited by one of their cohorts in the U.S. and is transferred
to pay off the credit cardloan or even prepay the credit card. The bank’s online services make it possible to transfer
funds between checking and creditcard accounts.”
Credit card associations, such as American Express,MasterCard and Visa, which license member banks toissue bankcards,
authorize merchants to accept thosecards, or bothIssuing banks, which solicit potential customers and issue the credit
cards.Acquiring banks, which process transactions for merchants who accept credit cards.
Third-party processors, which contract with issuing or acquiring banks to provide transaction processing andother credit
card–related services for the banks.Credit card accounts are not likely to be used in the initialplacement stage of money
laundering because the industrygenerally restricts cash payments. They are more likely to be usedin the layering or
Compiled by Srinivas Kante
Email: srinivaskante4u@gmail.com Special Thanks to Mr.Aravind Sankar
12
12
integration stages.
Example
Money launderer Josh prepays his credit card using illicit funds that he has already introduced into thebanking system,
creating a credit balance on his account. Josh then requests a credit refund, whichenables him to further obscure the origin of
the funds, which constitutes layering. Josh then uses the illicitmoney he placed in his bank account and the creditcard refund
to pay for a new kitchen that he bought.Through these steps he has integrated his illicit fundsinto the financial system.
A money launderer could put ill-gotten funds in accounts at banksoffshore and then access these funds using credit
and debitcards associated with the offshore account. Alternatively, he couldsmuggle the cash out of one country
into an offshore jurisdictionwith lax regulatory oversight, place the cash in offshore banks and— again — access
the illicit funds using credit or debit cards.In a 2002 Report called “Extent of Money Laundering throughCredit
Cards Is Unknown,” the U.S. Government AccountabilityOffice, the Congressional watchdog of the United States,
offered hypothetical money laundering scenarios using credit cards. One
example was: “[Money launderers establish a legitimate businessin the U.S. as a ‘front’ for their illicit activity.
They establish a bank account with a U.S.-based bank and obtain credit cards and ATM cards under the name of
the ‘front business.’ Funds from theirillicit activities are deposited into the bank account in the United States.
While in another country, where their U.S.-based bank hasaffiliates, they make withdrawals from their U.S. bank
account,using credit cards and ATM cards. Money is deposited by one of their cohorts in the U.S. and is transferred
to pay off the credit cardloan or even prepay the credit card. The bank’s online services make it possible to transfer
funds between checking and creditcard accounts.”
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