Prepaid Cards an Emerging Threat

Recent ICE investigations have uncovered an emerging

trend in the use of

prepaid or stored value

cards to smuggle

illicit proceeds out of the U.S.

Where criminal organizations previously employing bulk cash smuggling or the use of money launderers to wire proceeds out of the U.S.

they are now often turning to prepaid cards.

Prepaid cards are issued to customers

in two categories, closed system cards

and open system cards.The use of both

types involves numerous money

laundering vulnerabilities.

Closed System Cards

• Gift cards, phone cards, etc.

• Usually sold in preset

denominations.

• Cannot have additional value added.

• Cannot be used at ATMs.

• Limits on the use of closed system

cards make them a lesser, but still

significant, money laundering

threat than open system cards.

Open System Cards

• Most significant money laundering threat.

• Branded by American Express,

MasterCard, or Visa operate like

traditional credit or debit cards.

• Any prepaid card with ATM access

can be a remittance card.

• An estimated $30 billion in 

remittance payments go to 

Latin America from the U.S.

each year, with $10 billion to

Mexico alone.

• Remittance cards allow cardholders to use a bank payment

network, through ATMs, without

requiring a bank account.

• Remittance cards facilitate the

cross border movement of funds

without a declaration requirement.

Money Laundering

Vulnerabilities

• Funds can be loaded anywhere in

the world.

• Often no maximum load limit.

• Used at ATMs or as credit cards.

• No bank account needed.

• Can be activated online.

• The Bank Secrecy Act (BSA) 

Know Your Customer (KYC) 

policy and other BSA regulations

often don’t apply.

• Perfect platform for bulk cash

smuggling operations.

Recent Scheme

A scheme recently identified

through an ICE/IRS investigation

involved a criminal organization

providing stolen credit card numbers to a co-conspirator operating 

in Mexico.The co-conspirator used

commercially available magnetic

encoding devices to encode dummy

credit cards.

The co-conspirator was paid by

criminal organizations with gift

cards issued by U.S. retailers.The

gift cards were then used to purchase mobile phone cards, which

were smuggled into Mexico and

sold at a profit.The investigation

resulted in the arrest, indictment

and conviction of one foreign

national, the seizure of one vehicle

and a court ordered $50,000 fine. $

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December 2006

"Prepaid" or "stored value" cards are becoming a preferred method by criminal organizations

to move illicit funds out of the country.

The Official Newsletter of Cornerstone

U.S. Immigration and Customs Enforcement (ICE) is the largest investigative arm of the Department of Homeland Security (DHS).

ICE’s mission is to secure the homeland by enforcing immigration and

customs laws and by protecting U.S. commercial aviation and federal

facilities. Cornerstone, ICE’s comprehensive enforcement initiative

focusing on financial and trade fraud investigations, is a key component of that mission.

In addition to financial and money laundering investigations, Cornerstone targets commercial fraud, smuggling and trafficking, export and trade violations and intellectual

property crimes. ICE’s global reach allows the agency to investigate these crimes around

the world.

The Secretary of Homeland Security has determined that the publication of this newsletter is necessary in the transaction of business required by law of U.S. Immigration and

Customs Enforcement (ICE).

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I

n July 2006, ICE launched

Operation Paycheck, a national

initiative designed to combat criminal schemes involving the exploitation of the financial industry by

businesses to pay the wages of illegal alien workers.

ICE investigators have uncovered

schemes throughout the U.S. involving the commission of financial

crimes, such as money laundering,

structuring funds into and out of

financial institutions, and the operation of unlicensed money service

businesses (MSBs) to disguise the

payment of illegal alien workers.

To combat this criminal activity, ICE

investigators are leveraging their

combined investigative expertise in

financial crimes and worksite

enforcement to identify, disrupt and

eliminate organizations seeking to

exploit our financial industry to facilitate the employment of illegal aliens.

The Scheme

In most cases, many involving the

construction industry in the

Southeastern U.S., the employer of

illegal aliens establishes shell companies that appear to operate as subcontractors of the actual employer.

The employer is then able to pay the

shell company for their services,

often in the form of one large check

or numerous checks.The shell company (the subcontractor) then cashes the checks—frequently through a

culpable MSB—and pays the illegal

alien workforce in cash. Naturally,

the person or persons posing as the

subcontractor charge a fee for this

service, as does the culpable MSB.

The employer has now successfully

laundered the payroll of his illegal

alien workforce.

This scheme may also involve other

state and federal violations. For

example, the use of a shell company

and the payment of the illegal alien

workers in cash allows employers to

avoid withholding state, federal and

Social Security taxes from employees’ paychecks, in violation of state

and federal laws.

Successes

Under Operation Paycheck, approximately 48 criminal investigations

have been initiated.These investigations have resulted in the seizure of

over $3 million and the arrest or

identification of numerous suspects.

Continued on page 2

Cash and evidence seized during an investigation into the illegal activities of Pronto Cash, a

Florida business, that used mobile check-cashing vans pictured above, indicted for operating

an unlicensed money service.

ICE Financial Investigation Initiative

Combats Illegal Worker Employment 

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TheCorner

Inside This Issue

Safeguarding America through

Financial and Trade Investigations

www.ice.gov/cornerstone

Toll-Free Tip Line: 

1-866-DHS-2-ICE

Cornerstone is U.S. Immigration 

and Customs Enforcement’s (ICE)

comprehensive investigative initiative

for fighting financial crime, trade

fraud and intellectual property crime.

The Cornerstone Report is a

quarterly bulletin highlighting key

issues related to ICE financial and

trade investigations.

Demise of the 

Cali Cartel . . . . . . . . . . . . . . . 2

The E-Cornerstone of 

Economic Security . . . . . . . . 3

Prepaid Cards an 

Emerging Threat . . . . . . . . . . 4

Volume III: No. 2 • December 2006
Along-running

investigation of

the Cali drug smuggling cartel culminated in September

2006, when cartel

leaders Miguel and Gilberto

Rodriguez-Orejuela pled guilty in

the Southern District of Florida to

conspiracy to import over 200,000

kilograms of cocaine, and a forfeiture count for $2.1 billion.

The 15-year investigation under

ICE’s leadership is a testament to the

agents’ and prosecutors’ tenacity,

innovation and good old-fashioned

detective work.

The investigation began in 1991

when a drug-sniffing dog at the

Miami seaport alerted to a massive

shipment of cocaine concealed in

concrete posts. Continual surveillance over three months, and several

controlled deliveries of drugs in

Miami and Texas, resulted in agents

executing seven search warrants,

seizing 12,250 kilograms of

cocaine, and several arrests.

In June 1995, a federal grand jury in

Miami issued the first RICO (racketeering) indictment against the Cali

cartel, charging 59 defendants,

including the cartel’s four kingpins

(Miguel Rodriguez-Orejuela,

Gilberto Rodriguez-Orejuela, Jose

Santacruz-Londono and Helmer

Herrera-Buitrago), 10 defense attorneys and several hit men.

The indictment charged the Cali cartel with importing 200,000 kilograms of cocaine and laundering 

$2 billion from 1983 through 1995.

Gilberto and Miguel RodriguezOrejuela were apprehended and

jailed in Colombia in 1995. Santacruz

and Herrera were later killed.

Although the defendants were

imprisoned by Colombia in 1995,

they continued to run the cartel

from prison by working through

Miguel’s son, William RodriguezAbadia, and others.

In September 2003, ICE agents

obtained an indictment against 

11 cartel defendants, including 

the Rodriguez-Orejuela brothers,

for their recent drug and money

laundering activity. A superseding

indictment was obtained in January

2004, with more than $2 billion 

in assets being sought.

In November 2004, extradition

requests were approved, and several

months later the brothers were

extradited to the United States,

where they were sentenced to 30-

year prison sentences, marking the

end of the infamous Cali cartel. $

Demise of the Cali Cartel

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Volume III: No. 2

December 2006

Gilberto Rodiguez-Orejuela shown during 

his arrest and subsequent extradition to the

U.S. where he is currently serving a 30-year

prison sentence.

Continued from page 1

One of the most successful

Operation Paycheck investigations

was of Pronto Cash, an MSB in

Orlando, Fla. In this investigation

ICE uncovered a conspiracy involving construction companies and an

MSB involved in the payment of illegal alien workers. In the conspiracy,

shell companies posing as construction subcontractors falsely claimed

to have workers’ compensation

insurance on their illegal workers in

order to qualify for contracts.

These shell companies cashed

checks for the actual employer of

the illegal aliens, typically in excess

of $10,000, at Pronto Cash, an MSB

that used mobile check-cashing

vans. Pronto Cash promoted this

activity by not filing currency transaction reports (CTR) or by filing

CTRs with false information.

The construction companies then

paid the cash out to their illegal

workers.The scheme also permitted

the illegal workers to receive their

wages without being required to

present identification, which could

have exposed their illegal status.

In October 2006, a federal grand

jury returned an indictment charging the president of Pronto Cash

and several employees with operating an unlicensed MSB, money

laundering, avoiding or filing false

CTRs, mail fraud, wire fraud and

hiring illegal aliens.

ICE agents seized $2.8 million, as

well as computers, records and

other items of evidentiary value. $

•The withdrawal of large sums of cash from business bank accounts for the payment of wages.

•Business bank accounts—alleged subcontractors—

that make frequent high-dollar deposits by check

and immediate corresponding cash withdrawals.

•Checks written from one business to another for

payroll expenses, where checks are cashed

rather than deposited.

•Checks written from one business to another for

large sums that are then cashed at an MSB.

•Multiple checks issued to the same payee,

sequentially numbered, and under the $10,000

reporting requirement.

Red Flag Indicators
The Center

The ICE Cyber

Crimes Center 

(C3) in Fairfax,Va.,

is recognized

nationally and internationally 

as a leader in the investigation 

of international criminal activities

conducted on or facilitated by 

the Internet.

Created in 1997, the C3 brings the

full range of ICE computer and

forensic assets together to combat

such Internet-related crimes 

as possession, manufacture 

and distribution of child pornography; international money 

laundering; illegal arms trafficking; and intellectual property 

rights violations.

The Mission

Electronic currencies, or e-currencies,

can be fundamentally defined 

as units of value linked to the 

value of some other item that 

can represent cash, gold and other

precious metals, merchandise or

services facilitated via the Internet.

The use of e-currency systems 

by criminals has been well documented by ICE and other law

enforcement agencies.

To combat the laundering of 

e-currencies, ICE C3 developed 

the E-Cornerstone initiative,

an intensified investigative focus 

on e-currency and Internet 

money laundering that parallels 

and augments existing ICE

Cornerstone efforts.

ICE C3 has taken a three-pronged

approach to the E-Cornerstone 

initiative—training, outreach and

interagency cooperation.

Training: To foster the efforts to 

create a robust and aggressive 

investigative program, the C3 

has provided training to more than

150 ICE field agents in 2006 to

specifically focus money laundering

investigations on the Internet 

financial sectors.

Outreach: In an effort to establish

reliable points of contact and to

develop investigative leads, ICE C3

directs the field in conducting

industry outreach with financial

institutions that facilitate their businesses on the Internet.

Interagency Cooperation: ICE C3 

and the U.S. Secret Service are 

leading the Global E-Currency Task

Force (GETF), which works with

other domestic and foreign law

enforcement and private sector 

entities involved in e-currency 

to outline strategies to combat

online money laundering.

The Goal

Apprehending and bringing

violators to justice is one of 

the best ways to deter and 

prevent abuse in any system.

Investigating and arresting violators

who are using the Internet to 

launder and transfer money is

therefore a primary goal of the 

E-Cornerstone initiative. $

The E-Cornerstone of Economic Security

Specially-trained agents at the ICE Cyber Crimes Center investigate Internet-based 

financial crimes.

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December 2006