Are Gift Card Scams Funding ORC?

Education and awareness of the latest gift card scams are critical for retailers.

gift card scams

As professionals in the retail space, it’s our responsibility to keep up with the methods and tactics used by thieves when it comes to organized retail crime (ORC). These days, improving technologies equal potentially increased profits in the eyes of theft groups.

Criminals used to steal merchandise and fraudulently return it without a receipt for cash. But with more and more retailers catching on to elements of return fraud, many have changed their policies and begun issuing gift cards or merchandise credit instead of cash for non-receipted returns. This has solved the problem, right?

Unfortunately, the answer is no. Gift card scams now seem to be the order of the day. Thieves are now returning stolen merchandise and then reselling the gift cards themselves, according to a feature article in the latest issue of LPM Online. From the article:

As retailers have responded to the evolving needs of the business, most have changed their return policies and typically issue a gift card or store credit when returns are made without a receipt. Unfortunately, this still offers the thief a lucrative opportunity. Rather than fencing the merchandise for 30 percent of its value on the streets or selling the goods on the secondhand market for 60 to 70 percent of its value, they can return the merchandise to the store, receive a gift card, and sell the gift card for up to 80 percent of its market value. Factoring in the sales tax portion of the return, which can bring an additional 5 to 10 percent depending on the state, the thief can be looking at an 85 to 90 percent return on their “investment” for the stolen merchandise.

In “Gift Cards Have Become a Common Currency for ORC,” LPM Editorial Director Jac Brittain, LPC, looks at the market for resale gift cards and its ties to ORC and even the illegal drug market. Check out the full article to learn more.

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  • Nigel R.

    To Whom It May Concern:
    Gift cards are also bought by Credit Card Fraud groups as they can redeem them for full value. Also unless it is printed on the gift card they can use the fraudulently purchased gift cards to buy other cards. E.g. A prepaid master card 100.00 value can by an Esso Prepaid Gift Card. Often this is a low form of money laundering.

    However they hit a number of retailers in one day being able to sell the cards back on sites like Kijiji, Let Go and other third party gift card sites.

    This is often run by Organized Fraud Crime Groups.

  • John Hassard

    “This has solved the problem, right?”
    Wrong question.
    Gift cards were not implemented to stop criminals from returning items with no receipt. Unless you “eliminate criminals” you will not “stop” criminal activity. Gift cards allow significantly better tracking and thus the ability to manage fraud. But a retailer must place the proper type and amount of resources begin the scene (as in investigators of the proper type) to have a positive effect on losses, and crime.
    Consider this: Most retailers simply don’t do cash refunds without a receipt, so by default, most scams will involve whatever media IS used. The gift cards allow tracking, and thus loss management by investigators. Will it eliminate refund fraud, of course not, no more than any other retail theft prevention system, but they do allow increased management, should a retailer chose to do so. That will have a positive effect on loss rates.

    Very disappointing statement from a team that should know better. As LP professionals we must ensure communication is accurate. Gift cards are part of the solution, by by no means “the” solution, not will a solution “eliminate” theft. Eliminating refunds is perhaps the only way to “eliminate” refund fraud, and clearly that is no solution.
    John Hassard, MS, LPC, CPP, CFE


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