A bank sells reloadable open-loop prepaid cards to both customers and non-customers. What is a red flag associated with these cards that may indicate money laundering?

Question

Options

• AA bank customer historically purchases several prepaid cards near year-end.
• BA non-bank customer regularly loads large amounts of cash onto several prepaid cards.
• CA non-bank customer consistently uses the bank to obtain cash advances using a prepaid card.
• DA bank customer routinely purchases five prepaid cards in small even-dollar amounts on a

• A
  10% (2)
• B
  80% (16)
• C
  5% (1)
• D
  5% (1)

Explanation

According to the CAMS Study Guide, page 191, "Reloadable open-loop prepaid cards are a high- risk product for money laundering because they can be used to store and move large amounts of funds anonymously. They can also be used to access cash at ATMs or through cash-back transactions at merchants." Therefore, option B is a red flag that may indicate money laundering, as a non-bank customer who regularly loads large amounts of cash onto several prepaid cards may be trying to avoid identification, verification, or transaction reporting requirements.

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