Some shoppers have purchased gift cards, loaded the balances, and later discovered that the funds disappeared before the intended recipient ever used them. This scenario is often the result of gift card draining scams, in which bad actors steal gift card data or tamper with cards before returning them to store displays.
Once a consumer activates and loads a compromised cards, a bot alerts the criminals, who immediately drain the funds.
These scams escalated enough to draw the attention of the Department of Homeland Security (DHS) last year. Their investigation revealed that many of these operations are run by large overseas threat actor groups, which have collectively reportedly cost U.S. consumers more than $1 billion over the past two years.
Working to Curtail
Because gift card draining networks pose substantial risks, many organizations have moved to create defenses against this scam.
“These sophisticated crime networks have tried to find a vulnerability in the card supply chain, but it should be noted that industry and regulatory bodies are working to curtail these activities,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research.
“Major brands and their card and security partners have continually strengthened their packaging to show signs of tampering, as well as other security measures—such as to use tamper-evident seals and labels over key card information,” he said.
Gift Card Awareness
Consumer education is a critical part of fraud prevention, and informing customers about gift card scams is especially important as the holiday season approaches. Gift cards have become popular holiday gifts because they give recipients the flexibility to choose something they really want.
To ensure their gift stays secure, consumers can take a few simple steps to protect themselves this season.
“If a consumer is choosing a card off a display and not in tamper-proof packaging, they should browse several cards and ensure that the labels covering the account numbers are identical,” Hirschfield said. “These labels are generally difficult to reproduce if removed.”
Although gift card purchases may require a heightened awareness, the threat shouldn’t be blown out of proportion.
“Consumers should feel safe buying gift cards,” Hirschfield said. “While these crimes do occur and shouldn’t be minimized, Javelin research shows that very few consumers have ever purchased a gift card that was skimmed.”
