The Consequences of Anonymous Access to the Financial Payments System

Published date01 March 1998
Date01 March 1998
Pages7-13
DOIhttps://doi.org/10.1108/eb027165
AuthorRichard T. Preiss
Subject MatterAccounting & finance
Journal of Money Laundering Control
Vol.
2 No. 1
Analysis
The Consequences of Anonymous Access to the
Financial Payments System
Richard T. Preiss
Rapid advances in technology have conferred vast
benefits upon modern societies. Money can be
transferred by wire in an instant. The internet has
dispensed with the need to send faxes across tele-
phone wires. The days when it was necessary to
carry multiple currencies across the international
borders have all but disappeared. The day is fast
approaching when societies will be cashless and
people will be able to carry so-called smart cards1
that contain all of their funds in the form of elec-
tronic cash. Smart cards have the technical ability
to facilitate transfers of electronic cash from one
smart card to another. Electronic cash can be used
to shop on the internet and even gamble there.
The shares of a company can be bought and sold
on multiple stock exchanges through electronic
cash transactions. When a London stock exchange
is closed, for example, a person in the UK might
transmit electronic cash to New York and buy
publicly traded shares because the stock exchanges
in New York will be open. If a citizen of one
country loses faith in the national currency, he
might use an electronic cash transaction to convert
his assets into the stronger currency of another
country in a foreign bank account. The examples
of how modern technology will continue to bene-
fit us are numerous.
These benefits come with costs and present new
challenges for law enforcement worldwide. One
cost is that the new technology can be used to
facilitate economic crime in both the domestic and
international arenas. While governments must
observe borders, criminals long ago learned that
they can ignore them with impunity.
This article begins with a description of an
international bank fraud case that was tried in
Manhattan and describes how traditional bank
records enabled the prosecution to prove its case.
It focuses on some of the issues that arise when
modern technology is used by criminals and the
challenges thereby presented to law enforcement.
It also examines some of the consequences of pay-
ments systems that grant individuals anonymous
access to those systems.2 The article presents pro-
posals for regulating the issuance and use of smart
cards or any other stored cash value card available
for general use in a financial payments system.3 It
concludes with the recommendation that anony-
mous access to any financial payments system for
the payment or receipt of large amounts of funds
should be barred to all individuals and institutions.
AN EXAMPLE OF BANK FRAUD
On 19th February, 1997, a trial jury in Manhattan
convicted three members of a family that operated
banks in Puerto Rico, Panama, the Dominican
Republic and Venezuela of various bank fraud and
larceny charges. The writer was the lead prose-
cutor for this trial, which took more than three
months to complete.4
A grand jury in Manhattan had indicted the
three defendants5 on evidence that millions of dol-
lars had been stolen from their Puerto Rican bank
and used to prop up two of their other banks.
Further, the grand jury charged that the three
defendants had schemed to defraud depositors of
their Puerto Rican bank of millions more by mis-
representing both the quality of that bank where
the deposits were supposed to be located and the
very location of some of those deposits.
The crimes committed were truly international
crimes. Most of the depositor-victims were Ven-
ezuelan nationals and few had ever set foot in
Manhattan. Their money was supposedly placed in
Puerto Rican and Panamanian banks; the deposits
were funnelled to Puerto Rico through New York
and Miami banks. Virtually all of the money trans-
fers were accomplished by means of electronic
wire transfers or cheques that were processed in
Page 7

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