This year the Department of Homeland Security launched a task force to combat gift card draining, a scam in which criminals use stolen or altered gift card numbers to drain money from gift cards before the purchaser of the gift card can spend it.  The task force named “Project Red Hook” is focused on Chinese organized crime involvement in this scam.  In perpetrating the crime, criminals referred to as “runners” remove, tamper and then restock gift cards.  According to Homeland Security assistant special agent Adam Parks, a runner can go from store to store tampering with cards.  One accused runner, Ming Xue in a single day went to 14 Walmarts before being arrested.  Law enforcement found 2,260 Visa, Apple and Mastercard gift cards in his car.

The most common way gift card draining occurs involves scammers going to racks of gift cards in stores and using handheld scanners that are easy to obtain, read the code on the strip of the card and the number on the front.  They then put the card back in the display and periodically check with the retailer by calling its 800 number to find out whether the card has been activated and what the balance is on the card.  Once they have this information they either create a counterfeit card using the information they have stolen or order material online without having the actual card in hand.

Another common way gift card draining occurs is when scammers place a sticker with the barcode of a a gift card that the scammers possess over the actual barcode of the gift card in the rack.  Thus when the card is taken by the gift card purchaser to the checkout counter to have the card activated, the funds used to purchase the gift card are credited to the card of the scammer.  It is not until the gift card purchaser tries to use his or her card that it is discovered that there are no funds credited to the card.

Some retailers, in an effort to reduce gift card fraud put a PIN on the gift card so that if the card is used online, the user must have access to the PIN which is generally covered and must have the covering material scratched off in order to be visible.  Unfortunately, many purchasers of gift cards are not aware of this so they don’t even notice that the PIN on the card that they are purchasing has already had the covering material scratched off by the scammer who has recorded the PIN.

TIPS

When buying a gift card, only purchase cards from behind the customer service desk and if the card is preloaded, always ask for the card to be scanned to show that it is still fully valued.  This avoids all of the problems of tampering with the card before it is sold.

Always inspect the card carefully to make sure that the barcode has not been tampered with in any fashion and that the PIN is still covered.

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