Fraud Prevention

Using Gift Cards To Buy Drugs: How Return Fraud Is Funding The Opioid Crisis


They say gift cards are the gift that always fits. Apparently, this is especially true if you’re a fraudster, and many are using this unlikely currency to support their drug habits.

Law enforcement and drug users report that the scam isn’t hard to pull off, according to CNBC. Thieves simply walk into Walmart, Target, Home Depot, Lowe’s or another big-name retailer, steal an item, return it at a different store without a receipt and receive a gift card in return, which they can then turn around and sell to a pawn shop or secondary store for a lower price.

It’s called return fraud, and unlike the cyber fraud that has become so rampant in the changing retail environment, it requires no technical savvy, other than the knowledge of how the system works and what a person can get away with at major retailers.

One young woman recovering from heroin and oxycodone addictions told CNBC, “I would get receipts and take them back in there, and I would go and take things off the shelf. I would make sure I left the store so on camera it looked like I purchased the items, and then come back and go to customer service.”

The recovering woman said that, when you’re suffering from addiction, you’ll go to any length to get a fix, and other recovering patients who spoke with CNBC agreed. They remembered well the feeling of desperation when they needed fast cash to fund their next high.

Retail return losses total between $9 billion and $15 billion per year, according to a 2017 survey by the National Retail Federation. More than half of companies reported fraudulent gift cards or store credit in one or more locations – 57 percent, down from 66 percent last year, but still a significant number.

Police and retailers are catching on to the issue. Some have already taken steps to curb this activity, from flagging individuals who make repeated returns to requiring ID for customers returning items to requiring that secondary markets report all cash-for-gift-card transactions to law enforcement.

Police from Knox County and the city of Knoxville, Tennessee have found strong ties between drug overdoses and gift cards purchased. Now that the connection is known, regulators and law enforcement plan to get tougher on return fraud next year.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.