Chinese Organized Crime and Gift Card Fraud

With the holidays just around the corner, it’s a good time to remind everyone about the potential of Gift Card fraud.

Gift card fraud has become a growing concern for consumers and businesses alike. Under Project Red Hook, HIS (Homeland Security Investigators) is teaming up with our law enforcement and businesses to raise awareness of how Chinese organized crime groups are exploiting gift cards to steal and launder money.

Gift card draining techniques affect retailers and our nation’s economy and jeopardize our nation’s security and public safety. While gift card fraud is not committed by any one organization, Project Red Hook specifically targets Chinese organized crime groups due to the cross-border nature of the crime. This type of fraud erodes Americans’ confidence in our Nation’s economy and retailers and funds the illicit activities of Chinese organized crime groups.

Understanding Gift Card Fraud
Gift card fraud involves various tactics to steal the value stored on gift cards. Recently, criminals have increasingly used sophisticated methods to tamper with gift cards and exploit online vulnerabilities.

Here’s a closer look at some of the most common types of gift card fraud:
Card tampering: Criminals manipulate gift card packaging to steal the card information before the card is sold. They then place the tampered cards back on store shelves. When a consumer purchases and loads money onto the card, the criminal drains the funds.

Online attacks: Criminals gain access to online gift card accounts through phishing or hacking. They then use or sell the stolen card information online.

Victim-assisted fraud involves telemarketing groups tricking individuals via phone or online into purchasing gift cards and sharing the redemption codes with the criminals, often through scams that involve impersonating authority figures or loved ones in distress. The criminals sell the redemption codes to the criminal organization for a portion of the redemption value.

Indicators of Gift Card Tampering – Here are some red-flag indicators that a gift card has been tampered:

Visibly evident tears in the zigzag cuts around the perimeter of the secure pack or visible paper fibers around the borders where a sharp knife may have cut through at an edge.

• Visibly evident tears or exposed nicks along the pull tab or a pull tab that has been compromised or cut with a knife and then laid back down. A slight bend back and forth can show if this has occurred.
• Product and brand logos, colors, or marks closely resemble, but do not match a company’s intellectual property.
• The personal identification number (PIN) cover has pieces missing, is fully missing, is not flat/smooth or contains wrinkles.
• The product’s packaging or PIN covering deviates from the company’s standard gift card packaging. Compare the packaging and PIN to others on the shelf.
• There may be no physical signs of tampering, but the balance does not match what you purchased.

If you suspect that a gift card you purchased may have been tampered with, contact the customer support number on the back of the gift card.

To prevent gift card fraud:
Gift cards are for gifts – Only gifts – Not for payments. Never buy a gift card because someone tells you to buy one and give them the numbers.

Whenever you buy gift cards:
Stick to stores you know and trust. Avoid buying from online auction sites because the gift cards may be fake or stolen.

Inspect the gift card before you buy it. Make sure the protective stickers are on the card and that it doesn’t look like someone tampered with them. Also check that the PIN number on the back isn’t showing. Pick a different gift card if you spot a problem and show the tampered card to a cashier or manager.

Always keep a copy of the gift card and store receipt. Take a picture of the gift card and store receipt with your phone. The number on the gift card and store receipt will help you file a report with the gift card company if you lose the gift card or if you need to report fraud.

Report scams
If you’re a victim of a gift card scam, you should:

1: Contact the gift card issuer
2: Report the scam to the Federal Trade Commission at ReportFraud.ftc.gov

Thanks to the Department of Homeland Security for this timely reminder
https://www.dhs.gov/hsi/insider/tackling-gift-card-fraud

Gift Card info from the FTC
https://consumer.ftc.gov/articles/avoiding-and-reporting-gift-card-scams