Recognizing and Responding to Gift Card Fraud in Retail
Team up with HSI to disrupt and reduce gift card fraud occurring in the United States.
If you're a retailer and notice any suspicious activity related to gift card draining schemes, it's important to report it to your local law enforcement immediately. By alerting law enforcement, you're taking a crucial step in protecting your business and customers.
Encourage law enforcement to contact Homeland Security Investigations (HSI) for further coordination. We have the expertise and resources to help our law enforcement partners track down and charge these criminal organizations effectively.
Together we can disrupt and reduce gift card fraud occurring in the United States by:
- Identifying mechanisms to disrupt this activity and protect the gift card industry against criminals.
- Increasing national awareness of gift card tampering fraud to retailers and all levels of federal, state, tribal and local law enforcement across the country.
Report the Crime
Report the crime to local law enforcement and encourage them to report the incident to HSI and reference "Project Red Hook." Not all acts of gift card fraud will be attributed to organized crime groups; however, reporting suspicions can help HSI gather data for analysis.
Preventative Measures
To combat gift card fraud, we encourage retailers to:
- Be vigilant: Learn the signs of organized crime groups operating in your store.
- Secure packaging: Adopt tamper-evident gift card packaging to make it harder for fraudsters to manipulate the cards.
- Adopt technology solutions: Advanced technology can track and monitor gift card transactions, making it easier to detect and block fraudulent activity. Work with your technology teams and processing partners to deploy these solutions across your gift card programs.
- Contact law enforcement: Share intelligence and develop strategies for prosecuting fraudsters.
- Educate: Conduct training sessions for store personnel and loss/asset prevention teams to spot tampering activity and compromised card packaging.
Learn the Signs and the Scam
Many brands and retailers have taken preventative and protective measures via secure packaging, and other technology-based solutions, but these fraudsters adapt quickly and need to be stopped through consistent collaboration with law enforcement. Here is a glimpse into how these Chinese organized crime groups are operating under Project Red Hook:
- Theft: United States-based Chinese organized crime groups recruit and hire people, primarily of Chinese nationality, as “takers” who physically steal un-activated gift cards from stores.
- Tampering: “Takers” send the un-activated cards to colleagues known as “tamperers” who manipulate the packaging to gain access to the gift cards' sensitive information. They then re-package the cards in a way that makes it difficult to tell that the product has been compromised.
- Re-distribution: “Placers” put the repackaged, tampered cards back in stores, often in high-traffic locations. The “taker” and the “placer” can be the same person, but that is not always the case. These individuals may be taking and placing cards during the same store visit.
- Activation: The crime group’s “checkers” use tools, such as balance inquiries, to monitor when a consumer buys and loads funds onto the card.
- Theft and comingling: Once the card is funded and activated by the unwitting consumer, the “checkers” quickly transfer the funds into accounts in their control. The illicit gains are then spent on high-value products that are shipped overseas to be re-sold.
Coordinated Efforts
By teaming up with HSI, we can enhance your fraud mitigation strategies. Gathering data from gift card fraud across the country provides insights toward a comprehensive approach to identifying, disrupting and dismantling these networks.
