As the federal government tells it, the money men behind the Sept. 11, 2001, hijackers would never have been identified had they not been lousy bankers:

"The 9/11 hijackers opened U.S. bank accounts, had face-to-face dealings with bank employees, signed signature cards and received wire transfers, all of which left financial footprints. Law enforcement was able to follow the trail, identify the hijackers and trace them back to their terror cells and confederates abroad."

That's from a Treasury Department assessment of financial security threats in 2005. It went on to warn that the terrorists could have quietly moved large sums of money into or out of the U.S.:

"Had the 9/11 terrorists used prepaid ... cards to cover their expenses, none of these financial footprints would have been available."

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Six years after Treasury identified that vulnerability, concern that drug smugglers and terrorists are exploiting it is driving the federal government to change the rules for issuing and using prepaid cards, particularly high-value reloadable cards like the cash cards you might take with you on vacation.

By making it harder to get prepaid cards without subjecting buyers to government scrutiny, regulators and lawmakers hope to make it easier to detect patterns of money movement that could signal something nefarious. But card issuers and some business experts warn that the expense and paperwork involved in the new restrictions, which require issuers to keep records on who bought how much for five years, could drive smaller card operations out of the market.

A problem that's hard to quantify
When the government refers to "prepaid debit cards," it's not talking about the standard bank debit card you probably have in your purse or wallet. Because such cards are attached to bank accounts, they're already closely monitored my numerous federal agencies. If you gave a bank debit card to someone to do something bad with, it and you would be easily traceable.

One of the new rules, in fact, is to rename prepaid debit cards, which also used to be known as "stored-value cards," to avoid confusion.

They're now called "prepaid access cards" because they're not tied to a bank account. They're just pointers to a sum of money you've already paid up (or been given) in advance. The money itself can be anywhere, including accounts outside the reach of government monitoring.

"The distinction actually makes good sense," said James Angel, a business professor at the McDonough School of Business at Georgetown University. 

"You don't have that much risk of terrorism through a (bank) debit card," he said in an interview. "There's a problem with a prepaid card because it can begin with cash  — the trail is broken, and you can't track where the money came from."

Prepaid cards, and their fees, go mainstream

Jim Schlegel, a senior product manager at ACI Worldwide of New York, which creates and manages electronic payment systems for banks and major retailers, said the new rules are well-intentioned, but he questioned just how big a problem money laundering through prepaid cards really is.

It's "such a small percentage of the overall problem, and attempts to propose very heavy legislation and requirements around it put a drag on an otherwise growing and profitable sector," he said in an interview.

Law enforcement agencies and banking regulators acknowledge that there's no way to know how much money is being moved undetected across U.S. borders through the cards — that's the point of money laundering, after all.

But in a report late last year on money laundering and cross-border currency smuggling, the Government Accountability Office cited the Treasury Department's 2005 assessment to urge action to crack down on misuse of prepaid access cards, saying it was convinced that the shuttling of criminal proceeds across the border, "whether in the form of bulk cash or stored value" (on prepaid cards), poses "a significant threat to national security." 

In an examination of the threat last year, the Financial Action Task Force, an international agency established by the G-7 in 1989, said such an operation typically works like this:

A criminal organization repeatedly loads a prepaid card in increments just below the amount that would trigger a report to the government. (In the U.S., that threshold is $10,000, so if it were based here, the organization might regularly reload a card with $9,900.)

The card, or a second card linked to the same account, is sent to an associate, perhaps in another country, who withdraws the funds through ATMs. In one such operation based in Australia, more than $100,000 was laundered this way, the FATF reported.

That's how the Black Guerrilla Family, a Baltimore street gang, worked, according to a federal racketeering indictment, to which three gang leaders and accomplices pleaded guilty in April. 

For more than a decade, gang members locked up in Maryland's prisons blackmailed fellow inmates and sold narcotics and other contraband, the FBI said. They then "laundered the proceeds of their illicit activities through the use of pre-paid debit cards" sold by Green Dot, the nation's largest seller of the cards in retail stores.

The U.S. would seem to be especially vulnerable, because it's the world's biggest user of prepaid cards; the FATF report projected that by 2017, the U.S. will account for 53 percent of the worldwide market.

Follow the money to find the bad guys
How is this specific roadblock to tracking transactions a threat to security, especially when authorities can't quantify it as a significant percentage of all money laundering?

In congressional testimony last year, FBI Director Robert Mueller called the use of prepaid cards a "shadow banking system" that had "impacted our ability to gather real-time financial intelligence."

The new rules not only are supposed to make it easier for the FBI and other agencies to track prepaid cards back to the original purchasers; they also require issuers to alert the government to any large or otherwise suspicious transactions, like those multiple $9,900 purchases. That can all add up to a pattern of evidence that could tip off investigators to larger plans that are in the works.

The rules take effect Sept. 27. They fill 69 pages as drawn up by the Financial Crimes Enforcement Network, a branch of the Treasury Department known as FinCEN, illustrating just how complicated the industry that manages prepaid cards really is.

There are two main types of prepaid cards. One is called "closed system"; these are usually gift cards, student meal cards or transit and phone cards. They may or may not be reloadable depending on the program, but they're usually usable only with specific merchants, so their value in moving large sums of money is limited.

Of more concern are "open-system" cards, like those issued for some electronic payroll systems and travel programs and usable at thousands of businesses across the U.S. (If they're "branded" cards — that is, if they come with the Visa or MasterCard logo — they can be used to withdraw money directly through ATMs.)

Such cards make "the challenge of smuggling heavy stacks of cash nearly obsolete," Kumar C. Kibble, the deputy director of U.S. Immigration and Customs Enforcement, told Congress in March.

Jasbir Anand, a senior consultant at ACI, said the funds represented on such cards, which you can easily buy online, could "travel across borders without limitation." 

"You could have tens or hundreds of thousands of dollars associated with that card," Anand said in an interview, calling that "obviously a glaring exception" to current anti-money-laundering laws.

‘They've got to find somebody' to regulate
The new rules, in effect, shift the focus of regulation from where and how a card is used to where and how it is sold, Schlegel said.

"How do you investigate the funds related to a particular product ... when that card is merely an access point to a larger system?" he asked in an interview.

To put it another way, Anand said, the card itself is just a worthless piece of plastic. It's a token representing money that's being held somewhere else, very much like your checkbook.

In the same way that a husband can give his wife his checkbook, "I can give you the card, and that's not a financial transaction," Anand said. And "since that cannot be governed and controlled," the new rules target transactions the government can plausibly regulate — the actual initial loading of value onto the card.

"They've got to find somebody" to monitor, said Angel, of Georgetown University.

The rules include numerous exemptions to make issuing lower-value cards easier for those merchants, by excluding closed-loop cards — that is, gift cards and the like that can be used only at particular stores or service providers — of less than $2,000. They also exempt government-issued cards and many prepaid health care cards. The Treasury doesn't consider any of those to be a significant money-laundering threat.

But most open-loop cards, which can be used pretty much anywhere, fall under the regulations, and the onus to do all the paperwork falls on whoever "exercises principal oversight and control" of the card program. The rules don't clearly define what businesses are in that category.

That's not an issue for banks, which are heavily regulated and have processes in place because they already monitor billions of credit and regular debit cards. But many other previously unregulated or lightly regulated businesses issue or administer prepaid card programs: online shopping services, corporate rewards card programs, third-party payment processors — even celebrities, like the Kardashian sisters, who withdrew their Kardashian Kard from the market last year after customers complained about its high fees.

ConsumerMan: Prepaid cards will have you paying, all right

"The net impact of these rules would be an increase in the overall cost of debit cards for consumers for record-keeping and storage and so on that will eventually trickle down to fees on the debit card and a limitation on features," Anand said.

That also could choke adoption of future technologies developed on the science inside the stripes on your plastic cards, he said. An example would be cashless "mobile wallets" that live in your phone and work through near-field communication wireless systems.

"It's unfortunate that we're at the cusp of taking advantage of this huge channel and trend and something like this could really stifle growth," he said.

Even as it warns about the potential money laundering threat, the Financial Action Task Force also acknowledges that tight restrictions on prepaid cards could have a significant impact on lower-income people unable to "take full advantage of mainstream financial service providers" because they have a poor credit record, for example, or because they have no permanent address and can't qualify for a bank account. That's more than 17 million Americans, the Federal Deposit Insurance Corp. says, and for them, prepaid  cards can be the only way they can gain "ready access to services," the FATF said.

"It is important to recognize that public officials can sometimes take steps designed to 'protect' those who are disadvantaged when those steps may actually become barriers that actually restrict access to financial services," the task force said in a follow-up report in June. "For example, steps that add to the costs for prepaid products may make them less appealing to those living on the margin."

Customs is no barrier
There's another issue: The rules apply to transactions that take place in the U.S. Reputable overseas banks and other companies that want to continue doing business here will likely comply, but the U.S. can't impose its wishes on hundreds of thousands of merchants in other countries.

"I can walk into a country with a prepaid card that has a thousand dollars on it and add more to it," Anand said, which means that even under the new rules, a smuggler or a terrorist can easily obliterate investigators' money trail back to the source.

"Suppose I were a terrorist and I needed some money to buy some bomb-making materials locally, but my source of funding is over in Berzerkistan," Angel said. "They can have one of their operatives take a pile of cash, buy a prepaid card and get that into my possession without it being traceable back to anybody else in my terrorist cell."

And how would that operative get the card into Angel's possession? He or she would simply fly into the country with it. Prepaid access cards aren't treated like cash, which travelers are required to declare if they're carrying $10,000 or more.

"The debit card that looks, smells and tastes like (cash) — that doesn't count," Angel said.

Three senators — Amy Klobuchar, D-Minn., Tom Udall, D-N.M., and Jeanne Shaheen, D-N.H. — introduced legislation last month to close that loophole. It would require travelers to declare "prepaid cards totaling more than $10,000" when they enter or leave the U.S., just like cash.

That may sound like a common-sense approach, but card issuers and others have objections. The losers, they contend, won't be drug smugglers and terrorists — who likely wouldn't comply — but travelers and other innocent customers.

The rules could make prepaid cards less attractive to travelers, putting them at a competitive disadvantage to credit cards and other standard bank cards, which wouldn't be covered, said Kirsten Trusko, executive director of the Network Branded Prepaid Card Association.

The NBPCA, a trade group for companies that issue of prepaid cards carrying the logos of networks like MasterCard or Visa, has weighed in against similar attempts to require customs reporting of cards, calling them "unwise and impractical."

That's because you have to know the value of your prepaid card to declare it, Trusko said. And trying to determine a card's balance "while in flight or upon debarkation from a plane is burdensome and unnecessary," she said in a statement to msnbc.com.

Angel said the problem is more basic.

"I would think someone with a card with $10,000 or more on it would probably be watching it carefully and know they're over the limit," he said. But he warned that "the devil is always in the details," asking, "How are they going to catch somebody who violates?"

"If you're wearing a money belt with hundred-dollar bills in it, that's going to be kind of obvious," he said. "But if somebody's carrying a MasterCard, how are they going to know? It could get fairly invasive when they start searching people at the border."

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