by Devlin Houser

The Arizona Daily Star

A bill introduced Friday by U.S. Rep. Gabrielle Giffords aims to curb the flow of drug money across U.S. borders by closing a loophole that lets money in “stored value cards” go undeclared.

The bill, dubbed the “Stored Value Device Registration and Reporting Act of 2010,” has three major provisions.

• The bill would count money stored in pre-paid cards or other devices as any other form of currency, such as traveler’s checks or cash.

• Law-enforcement officials and national security experts have said a loophole in current law allows these devices to slip through undeclared and unregulated.

• Any time a stored value device is issued in excess of $10,000 in the United States, the issuer must register the card number with the Treasury Department.

• Finally, the bill would require a study to track the flow of money and how it’s being used. The cost of this last provision isn’t clear, Giffords said.

Failure to declare the money could result in a five-year prison sentence.

The bill takes aim at drug cartels in particular, which take advantage of the lax laws to move their proceeds out of the United States using the cards, Arizona Attorney General Terry Goddard said.

“Cutting down the illegal flow of funds to the cartels is a national security issue,” he said, citing the recent violence in the Mexican border cities of Nogales, Sonora and Ciudad Juarez. It’s a problem that should have been addressed five years ago when it became evident how these cards were being used, he said.

Many prepaid card vendors in the United States already have regulations in place that would make it difficult for money traffickers. Wells Fargo and Chase banks require the purchaser to be a bank customer – meaning identification is required – and both set limits of $500, bank spokeswomen said. Foreign institutions, in particular, may issue cards in larger amounts, Goddard said.

According to a 2010 study by the National Drug Intelligence Center, at least $17.2 billion in cash was smuggled into Mexico in 2003 and 2004. But authorities don’t track money stored in cards, Giffords said.

“Federal officials have no way of knowing how much money is really being trafficked in and out of this country,” she said. Giffords introduced the bill with U.S. Rep. Brian Bilbray, R-Calif.

Rep. Ann Kirkpatrick, D-Ariz., introduced a similar bill in March, though her bill does not propose a study of the stored-value devices.