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?
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A. B. C. D.B
The correct answer to this question is option B: "A non-bank customer regularly loads large amounts of cash onto several prepaid cards."
Prepaid cards are a popular financial tool that can be used for various legitimate purposes, such as making purchases or paying bills. However, they can also be used by criminals for money laundering purposes. Prepaid cards that are sold to both customers and non-customers can be particularly attractive to money launderers as they provide a degree of anonymity and can be used to move funds without detection.
The red flag associated with prepaid cards that may indicate money laundering is when a non-bank customer regularly loads large amounts of cash onto several prepaid cards. This pattern of activity may suggest that the customer is attempting to structure their transactions to avoid detection by keeping the value of each transaction below a certain threshold.
Structuring is a common technique used by money launderers to avoid detection. By breaking up large sums of cash into smaller transactions, they can avoid triggering transaction reporting requirements and keep their activities under the radar. In the case of prepaid cards, a money launderer might load several cards with large amounts of cash to avoid arousing suspicion.
It's worth noting that the other options listed in the question could also be potential red flags for money laundering. For example, option A suggests that a bank customer historically purchases several prepaid cards near year-end. This could be an attempt to avoid detection by using up their funds before the end of the year or to evade taxes. Option C suggests that a non-bank customer consistently uses the bank to obtain cash advances using a prepaid card, which could be an attempt to convert illicit funds into legitimate-looking transactions.
In conclusion, when dealing with prepaid cards, financial institutions need to be vigilant and look out for patterns of activity that suggest money laundering. The regular loading of large amounts of cash onto several prepaid cards by non-bank customers is a red flag that should be investigated further.