By Jenni Hesterman
The State Department recently issued its latest International Narcotics Control Strategy Report, detailing activities of countries involved in the drug trade and outlining U.S. policy and activity in the fight against the manufacturing and distribution of illegal narcotics. Released by the Bureau of International Narcotics and Law Enforcement Affairs, the report includes a new section entitled “Mobile Payments–A Growing Threat“, which outlines the ways technology may be exploited by nefarious groups to obscurely launder, move and store cash. Mobile payments, also known as “m-payments”, “proximity payments”, or “micropayments”, are point-of-sale cash transactions made through a mobile device such as cell phone or personal data assistant.
The sender takes the cash to a remittance center, which charges a modest service fee. The center then “sends” the amount to the recipient’s mobile account, also known as an e-wallet or e-purse. The recipient gets a text message on the mobile device indicating the sum has been placed in the account. The cash can then be collected at any participating remittance center, retail store, or, if business evolves as predicted, fast food outlet. The entire transaction takes mere minutes. Furthermore, use of a “throw-away” cell, phone purchased with cash, makes the transfer even more obscure and difficult to trace.
The Financial Action Task Force (FATF) is an inter-governmental body that works internationally to combat money laundering and terrorist financing. FATF has also shown concern over emerging telecommunications technology as related to licit financial transactions made outside the regulated banking sector. FATF calls them “new payment methods” or NPMs. NPMs are also referred to in the industry as “e-money”, “digital cash” or “e-cash”. Examples of NPMs include the following: Internet payment services; prepaid calling, retail and credit cards; digital precious metals; and the aforementioned m-payments.
Through internet payment services, money can be moved between accounts, and the balance can then be liquidated into an untraceable card used to withdraw cash from ATMs worldwide. Phone cards, retail cards and credit cards may now be purchased with cash at many stores. The owner of the cards remains anonymous, an unlimited number of small value cards may be purchased and held, and any subsequent use is virtually untraceable. Finally, the emerging commodity of digital precious metals is a way to store and move large amounts of cash. Through this service, users create an account requiring little personal information and then secure cash deposits against gold, silver and platinum held in “off shores” via the Internet.
Traditional money laundering makes “dirty” money “clean” after the crime was committed, and the money trail is usually quite easy to follow. Terrorists launder “clean” money by moving and storing it for the purposes of financing training and future operations. The lack of physical evidence in mobile transactions, and the ability to easily move and store money through various NPMs, should be of great concern to the law enforcement community.
About the Author
Jenni Hesterman is a retired Air Force colonel and counterterrorism specialist. She is a senior analyst for The MASY Group, a Global Intelligence and Risk Management firm that supports both the U.S. Government and leading corporations. She is also an adjunct professor at American Military University, teaching courses in homeland security and intelligence studies.
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