Date: Sept,2008
The use of electronic transactions has increased considerably in recent years. In Australia, the volume and value of cheque transactions in paper-based clearing systems fell from an average of 2.7 million per day in 2001 to 2.1 million in 2005, and from an average of $8.3b per day in 2001 to $6.3b in 2005 (APCA 2005). A correspondingly large increase in electronic banking has also been observed. This is hardly surprising, as the financial incentive to do business electronically in today’s highly competitive market is significant, with the cost of an online transaction often being a fraction of a non-electronic transaction (De Young 2001). Similarly, online retail spending has increased considerably with total sales in the United States in 2007 exceeding US$100b (Ames 2007). One of the more popular electronic payment systems is prepaid stored value cards (SVCs), such as gift cards issued by retail stores.
The overall market for gift cards is projected to grow to nearly $88 billion in 2008, with the fastest growth occurring in corporate purchases of gift cards for employees and customers, and in “open” gift cards – like the American Express Gift Card that can be redeemed at multiple merchants…. Corporate purchases will rise 72% from 2005 to 2008, growing from [US]$9 billion to [US]$15.5 billion. Open gift card sales are expected to almost quadruple from 2005 to 2008, growing from [US]$1.3 billion to [US]$5 billion, according to Mercator (American Express 2006).
This extensive use of SVCs, coupled with the convergence of financial services and electronic payment technologies, has created new opportunities for money laundering. This paper examines the nature of the risks and how they can best be addressed.
Detailed report link: here