The Extent to Which Credit Cards Are Used in Money Laundering Is Unclear

The consensus from industry, bank regulatory, and law enforcement  officials we interviewed was that credit card accounts were not likely to be  used in the initial stage of money laundering when illicit cash is first placed  in the financial system, primarily because of restrictions on cash payments. Some credit card industry representatives and bank regulators we  interviewed acknowledged that credit cards could be used in the layering  or integration stages of money laundering; however, the extent to which  this may be occurring is unknown. They indicated  that issuing and acquiring banks’ application screening processes, systems  to monitor fraud, and policies restricting cash payments and prepayments  made credit cards less vulnerable to money laundering. Regulatory officials told us that, in their view, credit  cards were considered a low risk to money laundering because the banks’  application screening process, systems for monitoring fraud, and policies  restricting cash payments and prepayments made credit cards less  vulnerable to money laundering than other areas of the bank.
What GAO Found

Money laundering is a serious issue; an estimated $500 billion are laundered annually. The extent to which money laundering through credit cards may be occurring, however, is unknown. Bank regulators, credit card industry representatives, and law enforcement officials interviewed by GAO indicated that credit card accounts were not likely to be used in the initial stage of money laundering, when illicit cash is first placed into the financial system, because the industry generally restricts cash payments. Industry representatives reported that, in their view, the banks' application screening processes, systems to monitor fraud, and policies restricting cash payments made credit cards less vulnerable to money laundering. At the time of GAO's review, the primary regulatory oversight mechanism to ensure the adequacy of anti-money laundering programs was the Bank Secrecy Act examination, which applies in the credit card industry to issuing and acquiring banks. The regulators said that the issuing banks' application screening process, fraud monitoring systems, and policies restricting cash payments lowered the risk of money laundering through credit cards.