On Forbes the other day, I read an interesting article about prepaid debit cards getting seized.The story is about Oklahoma police, but it discusses how they benefited from some technology developed for use by U.S. Customs & Border Protection in seizing prepaid debit cards. The interesting part of the story is that criminals are increasingly moving money across the border by means of prepaid debit cards; moreover, that these the information contained on the prepaid debit card can also be stored on any card with a magnetic stripe, including a hotel room key.
Truly fascinating, ingenious, and in hindsight, obvious. The story also says that detecting what is stored on these electronic debit cards used to take weeks, but some company called ERAD came up with a better way allowing customs to access the information in seconds. According to ERAD Group:
Even with probable cause, [customs officials] had no way of identifying the card value, freezing the funds or seizing the money at the point of arrest. ERAD-Prepaid™ solved that problem by condensing a process that takes many days, weeks or months into one that takes a few seconds.
This shed some light on to an increasing number of customs seizure press releases that I’ve read that involve people importing things CBP has sometimes called “fradulent gift cards” that contain “personal identity information”. One such story appeared the other day:
On Saturday, CBP officers arrested Ramzi Kadir, a 22-year old male, Mouad Benameur, a 21-year old male, and Abdelhakim Zaier, a 22-year old male, all citizens of Canada, after 13 fraudulent gift cards containing personal identity information were discovered in their possession. The men and cards were turned over to New York State Police.
So, perhaps cash was not stored on the magnetic stripes but some other personal information was stored. Something nefarious enough to cause CBP to arrest these individuals.
The Forbes piece caused me to wonder, if you’re traveling across the border with a prepaid debit card does it count toward the $10,000 threshold reporting requirement? Do prepaid cards with more than $10,000 have to be reported to CBP to avoid seizure? I think, yeah, probably. Most likely. Certainly, if the law isn’t clear whether it counts or not — to be on the safe side, you should report it to CBP to avoid a potential prepaid card seizure.
For the time being, I do not have time to look into this and provide a definitive legal answer; I’ll save that for paying clients. I can say that the definition of monetary instruments does not explicitly list “prepaid cards” as a category, but it certainly seems to be more like a “bearer instrument,” which is required to be reported.
Recall that things like credit cards and debit cards attached to a traditional bank account do not have to be reported under 31 USC 5316. But the prepaid cards are unique in that they are not attached to a bank account; basically, the money exists on the card and can be accessed at an ATM.
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