financial crime

Gift Card Scams

How to avoid becoming the next victim of a gift card scam (and what to look for)

If you’ve been paying attention to the news, you’ve probably heard about the recent rise in gift card scams. In 2016, it was estimated that gift cards in Canada were being used to launder up to $55 billion dollars, and more scammers continue to come out of the woodwork in 2019.

For example, last holiday season, an Ottawa woman purchased three gift cards from a major Canadian retailer as Christmas gifts, only to discover, to her embarrassment, that the values had been drained when the recipients tried to use them. In another case, a Montreal woman, who received a couple of department store gift cards for Christmas, held onto them for a few weeks before going shopping. When she went to use them, she discovered the cards were totally drained.

Another example is an employee who received an email that seemingly came from her boss, requesting her to purchase $2000 worth of gift cards for a work function. The request struck her as odd, but after completing his request, she sent him a fresh email to confirm it was taken care of. When he replied with complete confusion, they were able to confirm that the initial request came from an email scammer whose address was masked to look like her boss’ address. When they went to return the cards, they learned they were non-refundable.

So how are these scams possible when the cards were in these ladies’ possession the entire time? How are these fraudsters pulling it all off?

The most common way that scammers are taking advantage of gift cards is with the mag stripe. The stripe on the package and the stripe on the card are linked. Fraudsters will finely cut the package, lift the card, and put a bogus one back in. They’ll return it to the shelf and wait for innocent customers to load money on the card with the mag stripe on the packaging.

Other scammers trick victims by calling them on the phone, pretending to be an important agency such as the CRA and demanding payment by gift card. All that they require is the code on the back.

We want you to stay safe from gift card scams. Here are 5 ways to protect yourself from becoming the next victim of a gift card scam:

  1. When purchasing gift cards in-store, look carefully at the packaging. Does the package appear to be tampered with? Is the safety seal intact?
  2. Be wary when purchasing used gift cards. If you receive a message through an online marketplace like Kijiji or Facebook’s Marketplace asking for the activation code only, do not give it. Request to meet the buyer in person with cash upfront.
  3. If you receive a suspicious email or phone call requesting payment via gift card or to purchase a gift card, slow down before you make any purchases. Who is this request coming from? Does the email address look safe? Does the caller sound legitimate? Remember, no government agencies will ever ask you to make a payment with a gift card.
  4. Do not give any personal or financial information over the phone or email, and do not share any gift card activation codes over phone or email either. Never provide the numbers on the back of a gift card to someone you do not know.
  5. Do not click on links embedded in suspicious emails. If a message seems “off”, contact the sender directly by phone or in a fresh message to ensure the request was actually coming from them and not a scammer.

If you believe that you have been the victim of a gift card scam, be sure to report it to your local police service as soon as possible and then contact the vendor of the gift card.

Disclaimer:  This blog and website is made available by SKM Forensics for educational purposes only as well as to give the reader some general information and a general understanding of the topics discussed. SKM Forensics is not a law firm nor do we employee lawyers.  By using this blog site you understand that the information provided does not constitute legal advice. Should you be a victim of a crime we strongly urge you to seek accredited legal counsel and contact your local police service. Please note that the material in this blog is directed at readers in Canada so if you reside in any other country we would urge you to consult authorities from you local jurisdiction.