Newspaper article St Louis Post-Dispatch (MO)

Cops Fear Criminal Potential of `Smart Cards'

Newspaper article St Louis Post-Dispatch (MO)

Cops Fear Criminal Potential of `Smart Cards'

Article excerpt

Allan Doody, the U.S. Custom Service's No. 2 financial cop, has a bad dream.

He sees a drug dealer loading the electronic equivalent of ill-gotten $100 bills onto a "smart card" - a device that stores money from which purchases are deducted. Then, the drug dealer leaves the country, card safely in his wallet and packed with as much money as a suitcase of cash.

"We're worried," Doody said. "The problem is compounded 100 times with the thought of $100,000 in cash on a piece of plastic the size of a credit card."

As executives at some of the nation's largest banks ponder the potential profits from replacing currency with electronic cash, the people in charge of policing the world's money supply are nervous. Electronic cash, or e-cash, they fear, will let crooks hide, transfer and cleanse illicit gains like never before.

"These systems will provide great service to society," said Pamela Johnson, a money-laundering expert at the U.S. Treasury's Financial Crimes Enforcement Network, or FinCen. "We're just concerned they may be misused by criminals."

Regulators say they have time to prepare because it will be years before e-cash is widespread enough to make it feasible for criminals to abuse.

The existing banking system is effective at keeping tabs on the flow of suspiciously large sums of money. The key is a U.S. law requiring banks, car dealers, real estate brokers, currency-exchange services and other businesses to report any cash transaction of $10,000 or more to the Internal Revenue Service.

Banks describe the e-cash systems they're developing - such as one tested at the Atlanta Olympics - as a simple way for consumers to make purchases. Merchants simply use readers that deduct the purchase price from e-cash stored on consumers' plastic cards. Law enforcement officials say e-cash could be the key to criminals getting around the reporting hurdles. For one thing, electronic dollars, represented as bits and bytes, don't carry serial numbers as their paper counterparts do.

And so-called digital coins and checks being developed by firms like Cybercash Inc. and Digicash Inc. convert money into data stored in any computer's memory, ready to be zapped to any other computer in seconds via the Internet, avoiding bank transfer networks scrutinized by security officers. …

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