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U.S. authorities have taken a significant step in addressing the use of counterfeit Passport Cards for identity theft and fraud schemes within the banking sector. Today, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), in collaboration with the Department of State’s Diplomatic Security Service (DSS), issued a Notice aimed at informing financial institutions about the dangers associated with passport card fraud and urging heightened vigilance.
The Notice provides an extensive overview of the typologies linked to passport card fraud and highlights specific red flags to assist financial institutions in identifying and reporting suspicious activities in accordance with the Bank Secrecy Act (BSA). With this warning, the days of unquestioningly accepting a passport card as proof of identity are numbered.
From 2018 to 2023, U.S. passport card fraud has inflicted $10 million in actual losses and an additional $8 million in attempted losses, affecting over 4,000 victims. However, authorities suspect that the true extent of losses attributable to passport card fraud and identity theft may be considerably higher, prompting a call for increased reporting by financial institutions to uncover additional illicit activity.
FinCEN Director Andrea Gacki emphasized the importance of the partnership with DSS in addressing the concerning rise in the use of U.S. passport cards for fraudulent activities. The Notice aims to help financial institutions and their customers avoid falling victim to these crimes while reinforcing the necessity of remaining vigilant and reporting suspicious activities.
Passport cards are commonly used for travel to Canada, Mexico, the Caribbean, and Bermuda, but full book passports are required for other international travel. The Notice covers a range of financial institutions, including casinos, banks, insurance companies, money services businesses, mortgage companies, precious metals and jewelry industries, as well as securities and futures firms.
Greg Batman, Deputy Assistant Director for the Office of Investigations at DSS, reiterated the agency's commitment to protecting the American people and financial institutions from financial crimes involving counterfeit U.S. passport cards. He expressed hope that the Notice would assist financial institutions in recognizing fraudulent passport cards and preventing their unlawful use.
According to FinCEN, fraud related to counterfeit U.S. passport cards represents one of the largest sources of illicit proceeds in the United States and poses a significant money laundering threat. The Notice includes 17 technical, behavioral, and financial red flags associated with passport card fraud typologies to aid financial institutions in detecting and combating this pervasive issue.
In the effort to combat passport card fraud, financial institutions are advised to undertake a thorough examination of transactions, taking into account a variety of contextual factors alongside specific red flags. These contextual factors include a customer's historical financial behavior, the consistency of transactions with established business practices, and the presence of multiple red flags, all of which contribute to a more comprehensive assessment of potential illicit activity.
Technical red flags associated with passport card fraud encompass anomalies in the physical appearance of the card itself. This includes details such as a white, blurry border or a dark gray square surrounding the photo, which are indicative of counterfeit cards. Legitimate U.S. passport cards are distinguished by their laser-engraved features, resulting in a clear and crisp grayscale portrait image. Additionally, the absence of tactile text or raised elements on the card, as well as discrepancies in the holographic U.S. Department of State seal, serve as further indicators of potential fraud.
Behavioral red flags highlight suspicious customer behavior during transactions. This may include customers who lack knowledge of personal identifiers, such as their date of birth or social security number, or who exhibit an unusually keen interest in specific account details. Furthermore, customers who appear to be following directions from third parties or who conduct transactions at branch locations outside their typical geographic footprint may warrant additional scrutiny.
Financial red flags signal potential fraudulent activity based on the nature and pattern of transactions. Large cash withdrawals or wire transfers without a clear lawful purpose, attempts to negotiate a significant volume of checks payable to cash, and requests for daily withdrawal and transfer limits followed by unusual transaction activity are all examples of suspicious financial behavior indicative of passport card fraud.
This detailed list of red flags is intended to aid financial institutions in identifying and reporting instances of passport card fraud, thereby strengthening efforts to combat financial crime. The gravity of this issue is underscored by its inclusion in prominent government assessments such as the U.S. Department of the Treasury's National Money Laundering Risk Assessment and the National Strategy for Combatting Terrorist and Other Illicit Financing.
For further guidance on addressing passport card fraud, interested parties are encouraged to consult the full Notice issued by FinCEN, accessible here.
By fLEXI tEAM