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CAMS · Question #406

What is a major money laundering risk associated with a number of prepaid cards as opposed to credit or debit cards?

The correct answer is D. The anonymous access to funds. Prepaid cards pose a significant money laundering risk because they can often be purchased and used without linking to a verified identity, unlike credit or debit cards which require customer identification.

Risks and Methods of Money Laundering and Terrorist Financing

Question

What is a major money laundering risk associated with a number of prepaid cards as opposed to credit or debit cards?

Options

  • AThe risk of losing the prepaid cards
  • BThe inability to load the card with cash
  • CThe global access to cash through ATMs
  • DThe anonymous access to funds

How the community answered

(24 responses)
  • A
    4% (1)
  • B
    8% (2)
  • C
    4% (1)
  • D
    83% (20)

Why each option

Prepaid cards pose a significant money laundering risk because they can often be purchased and used without linking to a verified identity, unlike credit or debit cards which require customer identification.

AThe risk of losing the prepaid cards

Losing the card is a personal financial risk unrelated to money laundering and is not a risk that distinguishes prepaid cards from credit or debit cards in an AML context.

BThe inability to load the card with cash

The premise is incorrect - many prepaid cards can be loaded with cash at retail locations, which is actually a core part of the money laundering vulnerability, not a barrier to it.

CThe global access to cash through ATMs

Global ATM access is a feature shared by many card types including standard debit cards and does not represent a distinguishing money laundering risk unique to prepaid cards.

DThe anonymous access to fundsCorrect

Prepaid cards are frequently sold without requiring identity verification, enabling users to load and spend funds without the financial institution knowing who the true account holder is. This anonymity severs the audit trail that AML programs rely on, making prepaid cards a preferred instrument for layering and placing illicit funds.

Concept tested: Prepaid card anonymity as a money laundering vulnerability

Source: https://www.fatf-gafi.org/content/dam/fatf-gafi/reports/Prepaid-Cards-Mobile-Payments-Internet-Based-Payment-Services.pdf

Topics

#prepaid cards#anonymity#placement stage#new payment methods

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