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Sep 24, 2020 - Economy

Off-the-books employees face tumultuous banking

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an illustration of a credit card scanner on fire

Illustration: Lazaro Gamio/Axios

There's a very high probability that you have a prepaid debit card in your wallet. If you do, it's probably perfectly safe.

Yes, but: Some Americans, however, work in a quasi-legal industries like sex work or cannabis, and they can find it difficult to sign up for normal bank accounts or prepaid debit cards.

  • The result is that they can end up holding their money in foreign banks that have no FDIC protection.

Driving the news: An NBC News investigation, part of the FinCEN files obtained by BuzzFeed News, shows how debit-card company Payoneer steered its sex-worker clients to a Belizean bank that ultimately went bust.

The bottom line: Prepaid debit cards are cash-like instruments that have obvious attraction to money launderers. As such, they're a dangerous and under-regulated part of the financial system. If your money isn't in a U.S. bank, there's a good chance it isn't safe.

  • The crypto equivalent of prepaid debit cards is the stablecoin, purportedly backed by currency deposits at a foreign bank. That's even more dangerous.
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