Better Business Bureau, Secret Service and U.S. Attorney warn about gift card scheme this holiday season

 

AMHERST, N.Y. (WIVB) – The Secret Service recently arrested several people in western New York who are accused of buying up a large number of prepaid gift cards using stolen credit card numbers.

With Black Friday, Cyber Monday, Giving Tuesday and plenty of shopping on tap for consumers in the coming days and weeks, Better Business Bureau of Upstate New York (BBB), U.S. Secret Service (USSS), and U.S. Attorney’s Office (USAO) are teaming up to warn consumers and retailers of possible schemes and offer tips on keeping financially safe this holiday season.

Credit card fraud is behind a recent gift card scheme hitting major retailers and smaller chains which puts the public at risk. The Secret Service recently announced arrests of individuals who allegedly purchased a large amount of prepaid or reloadable gift cards using stolen credit card numbers. Better Business Bureau of Upstate New York and the Secret Service are advising the retail community to enhance point-of-sale fraud prevention procedures.

The gift cards include Visa, Visa Vanilla, MasterCard, American Express, Green Dot MoneyPak, MoneyCard and other reloadable or prepaid debit/credit cards. The cards were used at other stores or resold locally and online. To entice buyers, the gift cards are often priced lower than the stated value.

“Crimes against the financial sector and identity theft are among the largest challenges facing consumers and businesses today,” said Todd Laster, Special Agent in Charge (SAIC) of the United States Secret Service, Buffalo Field Office. “The situation active in Western New York has the potential to spread in a variety of ways impacting the financial health of the business community.”

“In this season of giving, too many criminals are looking to take your credit card and other personal information,” said U.S. Attorney William Hochul. “All year long but in particular at this time of year both shoppers and retailers need to be cautious. By heeding this warning and following the safety tips provided by BBB and Secret Service, Western New Yorkers will be better equipped for a safe and joyous holiday season.”

How the gift card scheme works

Individuals buy a dozen or more reloadable or prepaid debit/credit gift cards, using stolen credit card numbers. In one WNY case, the fraud loss totaled over $100,000. The Secret Service says those who purchased the cards may have ID to prove ownership of the stolen credit card, which can make it difficult for a retailer to deny the purchase. In other transactions, buyers used several credit cards re-encoded with stolen credit card data and then splitting the purchase among multiple credit cards, because some cards were denied.

“We know gift cards are in high demand during the holidays,” said Warren Clark, president of Better Business Bureau of Upstate New York. “Buying larger quantities of gift card may not be cause for suspicion this time of year. It is critical for us to alert retailers to this potential criminal activity. Retailers can protect their businesses and customers by implementing strong point-of-sale procedures to prevent fraudulent transactions.”

Last year, over $31 billion was spent on gift cards, according to the National Retail Federation. Annual fraud costs reached $32 billion in 2014, a 38 percent increase over 2013 according to a LexisNexis study.

Payment card fraud is a violation of multiple federal, state and local statutes. “Cases may be presented for prosecution by the U.S. Attorney Office in the Western District of New York,” added SAIC Laster.

For retailers – credit card fraud mitigation and best practice recommendations:

BBB and the Secret Service agree that it’s important to implement fraud prevention at an early stage and to make it part of new employee training, especially seasonal holiday employees.

  • Consider limits. While more is often better, in this gift card scheme, buying more than what is considered to be “standard” for a retailer could leave that company liable for purchases made with stolen credit cards.
  • Verify all credit cards carefully. Examine the credit card closely. Look for holograms and matching characters embossed on the card are the same height, size and style. Check the dates on the card.
  • Verify payment identity credentials. Signatures should match on the card as well as the receipt. Ask for supporting identity documents such as a driver’s license. Compare the signature on all documents presented.
  • Verify credit card digits. Both the last four digits on a credit card and the last four digits shown on a receipt should match. If a transaction is made where digits are different, known as magnetic-stripe re-encoding, it should be considered a red flag. Some point of sale terminals will display a warning, but employees should also visually check. Remember the credit card stripe contains the transaction information, not the numbers imprinted on the card itself.
  • Be cautious of multiple card attempts. Consider limits on credit card denials. The Secret Service reports in this gift card scheme, some thieves used four or more credit cards to complete their purchase before a credit card was accepted for payment.
  • Watch for suspicious behavior. Erratic actions, buying something and then returning to buy more, or distractions such as friendly conversation or angry outbursts can be suspicious in nature. Every situation is different but each should be assessed and proactive protocols to alert management or other authorities should be followed.

When organizations detect suspicious payment activity, management is encouraged to report this suspected criminal activity to relevant law enforcement agencies.

Falsification of credentials is a threat retailers will have to manage. Building awareness, applying vigilance in maintaining security controls as well as educating employees on processes and protocols is critical to managing and mitigating these types of threats.

For shoppers – gift card fraud mitigation and best practice recommendations:

  • Be cautious about buying gift cards from third parties or online auctions, because it is virtually impossible to tell whether the cards have any value remaining, if it was tampered with or to see if the card is expired.
  • If you are purchasing a gift card in store, make sure to check the packaging and any security seals.
  • Check the fine print to see if there are fees associated with the card. Some typical fees could include transaction or inactivity fees. In some cases, an organization may charge a service fee to issue the card.
  • See if the card has an expiration date. In some cases, the plastic card may expire before the five-year redemption period.
  • Check the terms and conditions on the gift card. If you are giving a card to a friend who wants to shop online, make sure the card can be used both online and in stores.
  • Consider the financial condition of the retailer or bank issuing the card. If you think the store may be on shaky footing, you may want to pass on buying a card.

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