The gift card industry is booming — and so is related fraud and organized crime

Joan Oanes says she was baffled to larn a acquisition paper she had purchased had been drained of each its money. 

The $50 Lululemon acquisition paper was bought past October astatine a Shoppers Drug Mart determination successful Brampton, Ont., and fixed to her sister-in-law successful December.

"The receipt is there. It says it's activated," said Oanes. "How travel there's nary wealth successful it?"

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Martin Paquette, successful Oakville, Ont., knows the feeling. The $50 Sephora acquisition paper helium bought for his girl for Christmas astatine Walmart was besides emptied of its full value.

"My girl was embarrassed, to accidental the least," said Paquette. "We were informed that it was utilized for an in-store acquisition connected Dec. 25, which seemed a small unusual to america due to the fact that nary stores are open."

Big business, large theft

The acquisition paper manufacture successful Canada is booming and is expected to balloon from astir $11 cardinal successful 2023 to astir $14 cardinal by 2028, according to a 2024 study by Research and Markets. But wherever there's large business, there's besides a large accidental for theft, warns 1 expert, noting that consumers request to beryllium alert of imaginable scams. 

"There's a batch of wealth to beryllium made," said Joe Aversa, subordinate prof astatine Toronto Metropolitan University's Ted Rogers School of Retail Management.

"The information that this is happening is not astonishing to maine and [thieves are] getting much and much sophisticated."

Experts accidental determination are galore ways fraudsters tin bargain acquisition paper balances earlier the intended recipients tin usage them.

The cards are often displayed successful kiosks connected income floors, allowing scammers to bargain them and transcript their barcode numbers and PINs oregon information codes earlier returning the tampered cards to the store.

The thieves past hold for the cards to beryllium purchased and loaded with wealth by unsuspecting customers earlier they usage the stolen codes and pins to drain the funds from the cards.

"If you bargain it successful the store, effort to bargain it successful a store wherever the acquisition cards are locked up oregon successful a drawer versus retired successful the open," said retail expert Bruce Winder. "And walk it reasonably quickly, too."

Winder says consumers person nary extortion from fraud erstwhile it comes to acquisition paper draining.

"Right now, unfortunately, it's a hazard that a lawsuit has to eat." 

WATCH | Organized transgression tied to acquisition paper scams:

Jeffrey Horncastle, with the Canadian Anti-Fraud Centre (CAFC), says cautiously inspecting acquisition cards is important due to the fact that immoderate fraudsters surreptitiously screen a card's existent barcode with a secondary one, which funnels the wealth elsewhere erstwhile the paper is loaded.

"Take your time, verify the packaging and you'll prevention yourself from being a victim," said Horncastle who suggests consumers inspect their acquisition paper packaging to guarantee it hasn't been altered oregon tampered with.

According to the Retail Council of Canada (RCC) successful 2021, $3.8 cardinal successful losses were reported owed to acquisition paper fraud, though immoderate experts accidental the existent fig could beryllium overmuch higher due to the fact that galore bash not study it.

Winder says acquisition cards bash not person the aforesaid layers of authentication oregon information features that recognition oregon slope cards do, making them an casual people for criminals to exploit.

Getting your wealth backmost erstwhile you've realized your acquisition paper has been compromised tin besides beryllium challenging, adjacent with a receipt, arsenic Joan Oanes and Martin Paquette rapidly learned.

They some approached their acquisition paper companies and third-party retailers with nary luck.

"I'm being bounced similar a shot from Shoppers to Lululemon conscionable to get what I purchased," said Oanes.

Lululemon did springiness Oanes a $30 US acquisition paper for the inconvenience, but she's inactive retired immoderate money.

"I conscionable privation the assurance that the acquisition paper I'm purchasing is harmless and it truly has worth successful it."

Paquette agrees. "I conscionable truly wanted idiosyncratic to instrumentality immoderate responsibility."

Project Red Hook

Law enforcement officials successful the United States person linked immoderate of their country's acquisition paper fraud  — and the nonaccomplishment of hundreds of millions of dollars — to Chinese transgression groups.

The Department of Homeland Security (DHS) launched a task unit called Project Red Hook to bring unneurotic instrumentality enforcement agencies and retailers to analyse and dismantle these networks.

"What we saw, astir successful 2023, was the emergence of organized transgression into acquisition cards," said Adam Parks, an adjunct peculiar cause successful complaint astatine Homeland Security Investigations, a instrumentality enforcement bureau wrong DHS, successful Baton Rouge, Louisiana.

"We identified this arsenic an organized transgression threat, specifically cross-border. And due to the fact that of that, we decided to get progressive and instrumentality Project Red Hook." 

Parks said the wealth siphoned from acquisition cards is often utilized to acquisition high-dollar luxury items, similar Apple products and decorator handbags, to beryllium sold successful China for cash.

HSI officials accidental immoderate of that wealth past goes to backing illicit enactment similar fentanyl accumulation and smuggling, amerciable migration and quality trafficking.

Last December successful Florida, a Chinese nationalist pleaded blameworthy to the possession of much than 6,000 unauthorized acquisition cards successful a strategy to defraud consumers. 

Officials accidental the endeavor "involved individuals stealing acquisition cards from the store, obtaining the relationship accusation from the backmost of the cards, resealing the cards successful their archetypal packaging, and placing the acquisition cards backmost onto the shelves of a antithetic store determination for customers to purchase. Once a lawsuit purchased the acquisition paper and loaded a monetary magnitude onto it, the fraudsters had entree to the funds without the customer's knowledge."

"We are astatine astir 160 arrests astatine this point," said Parks, who added these Chinese transgression networks are not conscionable operating successful the U.S.

"We cognize for a information it's happening successful Canada," helium said. 

"And we person worked with our Canadian instrumentality enforcement partners, the RCMP, the CBSA and others."

Gift paper fraud successful Canada

When asked if determination was a akin task unit successful Canada investigating Chinese organized transgression syndicates progressive successful acquisition paper fraud, the RCMP said it was moving alongside the Canadian Anti-Fraud Centre to stock accusation with local, nationalist and planetary instrumentality enforcement partners to combat fraud and scams.

The national section of justness told Go Public it's not liable for transgression investigations and "questions astir the usage of prepaid cards by organized transgression groups oregon instrumentality enforcement efforts to tackle specified enactment are champion directed to the constabulary forces of jurisdiction."

Retail expert Bruce Winder says retailers tin play an important relation successful protecting consumers from acquisition paper theft.

"You tin fastener up the cards," said Winder, truthful they're lone accessible with the assistance of a income person.

But retail adept Joe Aversa says it tin beryllium tricky for stores to equilibrium preventing theft and fraud with making acquisition cards disposable and accessible to shoppers.

"They privation to evidently enactment successful protocols to assistance forestall thefts from taking place, but not astatine the hazard of making it inconvenient for the consumers," helium said.

WATCH | Tips to support yourself against card-draining scams: 

After Go Public contacted Loblaw, Shoppers Drug Mart's genitor company, it said "gift paper fraud is an contented impacting the retail assemblage arsenic a whole" and its income teams person been "trained to admit tampering."

Oanes said the institution contacted her aft Go Public reached retired and offered to regenerate her Lululemon acquisition card.

In an emailed connection to Go Public, Walmart Canada said it "issues and processes thousands of acquisition cards regular and incidents of acquisition paper tampering are highly rare." The institution besides said that to further support customers, it displays acquisition cards successful high-traffic areas and its employees are trained to look for signs of tampering.

Martin Paquette says Walmart Canada besides offered to regenerate his daughter's Sephora acquisition paper aft being contacted by Go Public.

And portion he's blessed with the outcome, helium says that successful future, he'll beryllium much diligent and lone bargain cards from the stores that contented them. 

"The third-party retailer is astir apt not a bully thought due to the fact that the cards aren't unafraid successful the store, arsenic acold arsenic I'm concerned."