Pubdate: Fri, 10 Jun 2016
Source: Tulsa World (OK)
Copyright: 2016 World Publishing Co.
Contact:  http://www.tulsaworld.com/
Details: http://www.mapinc.org/media/463
Author: Clifton Adcock
Bookmark: http://www.mapinc.org/af.htm (Asset Forfeiture)

OHP CARD READERS CAN SEIZE FUNDS

Civil Asset Forfeitures From Prepaid Cards Prompt New Concerns Over 
Civil Liberties.

The Oklahoma Department of Public Safety has purchased several 
devices capable of seizing funds loaded on to prepaid debit cards to 
aid troopers in roadside seizures of suspected drug-trafficking proceeds.

The portable card scanners are designed to be carried in law 
enforcement vehicles, allow troopers to freeze and seize money loaded 
onto a prepaid debit card, and to return money to an account whose 
funds were seized or frozen.

The vehicle-mounted scanners are also capable of retrieving and 
storing limited account information from other cards as well, such as 
banking debit cards, credit cards and "payment account information 
from virtually any magnetic stripe card," according to the website 
and patent documents of the device manufacturer, Texas-based ERAD 
Group Inc. ERAD stands for Electronic Recovery and Access to Data.

The card readers could reignite debate over civil asset forfeiture in 
Oklahoma and across the nation. State and federal laws allow law 
enforcement agencies to seize property and cash believed to be 
involved in the illicit drug trade and then take ownership of the 
assets through a civil-court action.

Law enforcement officials say that civil asset forfeiture is 
essential in disrupting drug trafficking operations. Civil-rights 
advocates argue that the process violates individuals' property and 
civil liberties and sometimes results in innocent people having money 
seized on the roadside without being arrested or charged.

The new devices will now allow law enforcement to not only seize 
money in physical possession of a person being stopped, but from a 
financial institution holding the money loaded onto a prepaid debit 
card, as well.

Brady Henderson, legal director for ACLU Oklahoma, said the new 
tactic could easily run afoul of the Fourth Amendment and land the 
issue in court.

"I think this is likely to expand pretty radically the scope of civil 
asset forfeiture procedures," Henderson said. "This is a capability 
that law enforcement has never had before and one that is very likely 
to land DPS in litigation."

However, law enforcement officials say the devices are essentially 
part of the arms race between police and drug traffickers, who in 
recent years have been loading prepaid cards with millions of dollars 
for transport as part of the drug trade, thus decreasing the 
likelihood of seizure by law enforcement.

"They're basically using prepaid cards instead of carrying large 
amounts of cash," said Lt. John Vincent, public information officer 
for the Oklahoma Highway Patrol.

Instant seizure

(http://oklahomawatch.wpengine.netdna-cdn.com/files/2016/06/ERADContractBid.pdf)The 
contract signed by the state and ERAD Group, obtained by Oklahoma 
Watch, states that the Department of Public Safety will pay a 
one-time $5,000 implementation charge and a $1,500 training charge 
for the devices.

ERAD Group will receive a 7.7 percent cut of all funds seized via the 
card readers. Vincent said the 16 prepaid card readers obtained by 
the department were installed in May.

The card readers will not be used to randomly swipe motorists' gift 
or prepaid cards, Vincent said, but only in cases in which the 
trooper suspects criminal activity is taking place. The device logs 
which trooper is using the device when a card is swiped.

"If we have reasonable suspicion to believe there's a crime being 
committed, we're going to investigate that. If someone has 300 cards 
taped up and hidden inside the dash of a vehicle, we're going to 
check that," Vincent said. "But if the person has proof that it 
belongs to him for legitimate reasons, there's nothing going to 
happen. We won't seize it."

A joint law enforcement drug interdiction team under the Oklahoma 
County District Attorney's Office also has the devices, and Oklahoma 
City police officers who are part of the team use them, said Capt. 
Juan Balderrama, spokesman for the Oklahoma City Police Department.

Henderson said the devices were something that his organization has 
not run across before.

"You have effectively a way of instantly seizing a digital account 
from a traffic stop," Henderson said. "That's a capability I have 
never seen before."

Judith Rinearson, a partner with the law firm Bryan Cave and a 
prepaid card-industry attorney, said in the past most individuals who 
used reloadable prepaid cards were unbanked or low income, but 
younger adults have begun using those cards as their primary 
financial transaction card.

How it works

ERAD card scanners were first developed around 2012 for the science 
and technology arm of the U.S. Department of Homeland Security to 
combat the use of prepaid debit cards by drug cartels to transport 
drug money, according to a Homeland Security media release.

Since then, some law enforcement agencies around the country have 
adopted the technology.

According to ERAD Group's patent for the device, law enforcement can 
determine the balance of money in an account associated with a 
prepaid card that is part of branded "open loop" networks such as 
Visa or MasterCard or "closed loop" cards that allow purchases only 
at a single company, such as gift cards.

When the card is scanned by the officer to check the account balance, 
the system disguises the balance request as a typical vendor request 
to prevent alerting suspects that law enforcement is checking the 
card, the patent states.

Once the card's account balance is determined, the officer can use 
the device to freeze the funds, preventing withdrawal or use of the 
money in the account, or seize the funds by having them transferred 
to a law enforcement financial account, the patent states.

Although the device does not allow funds from non-prepaid cards to be 
frozen or seized, it can provide the officer information about those 
cards such as the card number, the name on the card, expiration date 
and the card issuer.

That data, along with any accompanying notes, is then saved in a case 
management database for future use, allowing law enforcement agencies 
to search for additional illicit funding by analyzing other card 
seizures, transactions and trends associated with the card issuer. 
The agencies also identify any accounts linked to the seized card, 
the patent and contract documents show.

T. Jack Williams, ERAD Group president and one of the leading 
magnetic stripe card consultants for federal and state law 
enforcement, said the device has three main purposes: intelligence, 
forensics and asset seizure.

"The seizure stuff is really secondary, even tertiary," Williams said.

Williams declined to say exactly how many law enforcement agencies 
across the country now use ERAD devices.

"I can tell you it's in the hundreds," Williams said.

Williams said freezing or seizing funds from prepaid debit cards is 
not the same as freezing or seizing funds from bank or debit cards, 
because prepaid cards come from pooled accounts held by financial 
companies and are not protected by the Bank Secrecy Act.

"Prepaid cards are cash, they are not bank accounts," Williams said.

Concerns

According to a slide presentation delivered by ERAD's Williams in 
early May at the West Coast Anti-Money Laundering Forum, using the 
card readers to obtain information on cards' magnetic strips do not 
run afoul of the U.S. Constitution's Fourth Amendment protections 
against unreasonable search and seizure and warrantless searches.

Citing an Oklahoma case in which 83 Wal-Mart gift cards were seized 
after the cards were loaded with drug funds, Williams' presentation 
states that because prepaid cards are treated like currency, they can 
be seized like currency. "Individuals do not have privacy rights with 
magnetic stripe cards" because the information on the strip 
"literally has no purpose other than to be provided to others to 
read," the presentation said.

Henderson said usually in freezing or seizing money from financial 
accounts, "there are all kinds of steps where courts get involved so 
that there's a check and balance there. All of that would be 
eliminated in this situation. It's a situation where you have an 
instant freeze with zero due process."

Sen. Kyle Loveless, R-Oklahoma City, said he, too, was concerned with 
the constitutional and due process implications of the ERAD devices.

"Until this, we didn't even know these things were in existence," 
Loveless said. "It's scary to know that technology even exists and 
that government agencies are using it without an arrest, without a warrant."

Last legislative session, Loveless introduced legislation to change 
aspects of the state's civil asset forfeiture laws. The move 
triggered sharp criticism by law enforcement officials, and the 
legislation died in committee.

Before the session, Loveless said he was told by law enforcement that 
the presence of large sums of money packed into a vehicle was an 
indicator of possible criminal activity .

"It seems to me this new technology is taking the argument away - 'we 
don't have the cash here, but it's somewhere,' " Loveless said.

However, Vincent said the devices are not only for seizure of 
suspected illicit funds. Although no seizures have yet been made with 
the devices, troopers have been able to use the card readers to 
uncover cases of identity theft, he said.

"The asset forfeiture part will definitely help us as far as we have 
people trying to courier large amounts of money, but it also, and is 
probably is seen more as, helping with identity theft, credit card 
fraud and all of that," the DPS official said. "This isn't solely 
about asset forfeiture. This isn't about money. We're not in the 
business of making money. We're in the business of solving crimes."
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MAP posted-by: Jay Bergstrom