Federal authorities continue to investigate and arrests potential gift card fraudsters nationwide as part of Operation Red Hook.
As NBC Bay Area reports, arrests in Sacramento, CA, represent a prime example of both the expansive network of criminal activity and the broad nationwide scope of federal probe into the crime syndicate. Their report uncovered a wide swath of arrests from coast to coast:
“In all, we’ve found at least 30 arrests and more than 45,000 cards collectively confiscated in California, Massachusetts, New Hampshire, Kentucky, Ohio, Minnesota, Missouri, Virginia, Arizona, South Carolina, Rhode Island, and Texas.”
How Gift Card Scams Target the Unexpected, And What It Means for Banks, a recent study from Jennfier Pitt, Senior Analyst in Javelin’s Fraud & Security practice, focused specifically on gift card fraud. In further exploration of overall risk management on prepaid, my report Mitigating Risk in Prepaid Card Programs highlights the overall broad problems and the steps gift card providers can take to better prepare themselves and their consumers to safely utilize gift cards.
Gift Cards Are a Valued Target
Gift cards represent high value targets for criminals because of the instant anonymity of the products and the easy access cards have in retail locations. The access allows criminals to swap cards that are later unknowingly purchased by consumers with no knowledge that the funds they load to cards will be diverted to the criminal’s accounts.
Javelin research shows that the vast majority of consumers, 73%, have not experienced fraud/theft issues with prepaid cards. But the financial implications of the remaining 27% can be a large problem. Of the total population, 7% of consumers report issues with skimmed or counterfeit cards.
This may seem like a small group but the impact of 7% leads to a financial impact in the billions of dollars, as reported by NBC. This is further emphasized in the current late spring to early summer gifting season of Mother’s Day, graduations, and Father’s Day. Javelin research continues to show that gift cards remain the most requested and most given gifts across all consumer spectrums.
Mitigating these risks becomes a tall order for retailers, but one that must be a key security strategy to instill customer confidence. Retailers, program managers and other third parties hold an incentive and responsibility to maintain the desirable, accessible nature of gift cards in retail stores.
Retailers can take proactive approaches as simple as training employees to better monitor gift card retail areas as well as understanding how to spot potential tampering during checkout. Card programs can also work to emphasize better, tamper-proof packaging and education for consumers to identify tampered cards. While these steps and continued legal enforcement cannot fully eliminate the risk, they can better prepare both businesses and end consumers to continue to freely and safely use their gift cards.
