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Joan Oanes was shocked to find that a $50 Lululemon gift card she purchased last October at a Shoppers Drug Mart in Brampton, Ont., had been drained of its funds by the time she gifted it in December.
“The receipt is there. It says it’s activated,” Oanes said. “How come there’s no money in it?”
Martin Paquette of Oakville, Ont., faced a similar experience when the $50 Sephora gift card he bought for his daughter at Walmart was also emptied.
“My daughter was embarrassed, to say the least,” Paquette said. “We were informed that it was used for an in-store purchase on Dec. 25, which seemed a little strange to us because no stores are open.”
Growing Industry, Growing Fraud
The gift card market in Canada is expanding rapidly, projected to grow from $11 billion in 2023 to nearly $14 billion by 2028, according to a Research and Markets report. However, this lucrative industry has also become a prime target for fraud.
Retail expert Joe Aversa from Toronto Metropolitan University warns that criminals are growing increasingly sophisticated in their tactics.
“The fact that this is happening is not surprising to me,” Aversa said.
Experts explain that scammers often tamper with gift cards displayed in stores, copying barcode numbers and PINs before returning them to the shelves. Once unsuspecting customers load funds onto the cards, thieves use the stolen information to drain the balances.
“If you buy it in the store, try to buy it where the gift cards are locked up or in a drawer versus out in the open,” advised retail analyst Bruce Winder. “And spend it fairly quickly, too.”
Unfortunately, consumers currently have little to no protection from gift card fraud.
“Right now, unfortunately, it’s a risk that a customer has to eat,” Winder added.
Ties to Organized Crime
According to the Canadian Anti-Fraud Centre (CAFC), fraudsters sometimes cover gift card barcodes with fake stickers to redirect funds elsewhere. Experts advise carefully inspecting cards before purchase.
In 2021, the Retail Council of Canada reported $3.8 million in losses due to gift card fraud, though the real number is likely much higher due to unreported cases.
Law enforcement in the U.S. has linked gift card fraud to Chinese criminal groups. The Department of Homeland Security launched Project Red Hook to dismantle these networks, which use stolen funds to purchase high-end products resold in China for cash. Some of this money is believed to finance illicit activities, including fentanyl smuggling and human trafficking.
“We identified this as an organized crime threat, specifically cross-border,” said Adam Parks, a Homeland Security Investigations official. “And we have worked with our Canadian law enforcement partners, the RCMP, the CBSA, and others.”
Consumer Protection Measures
While Canada lacks a dedicated task force to investigate organized gift card fraud, the RCMP is collaborating with the CAFC and international agencies.
Retail analyst Bruce Winder suggests that stores could lock up gift cards to prevent tampering, but retail expert Joe Aversa cautions that balancing security with consumer convenience is a challenge.
After Go Public contacted Loblaw, Shoppers Drug Mart’s parent company, it acknowledged the fraud issue and said its staff is trained to detect tampering. Walmart Canada also responded, stating that cases of gift card fraud are “extremely rare” but that it places gift cards in high-traffic areas and trains employees to spot suspicious activity.
Following media intervention, both Shoppers Drug Mart and Walmart offered to replace the stolen funds for Oanes and Paquette. While relieved, Paquette says he will now only buy gift cards directly from issuing retailers.
“The third-party retailer is probably not a good idea because the cards aren’t secure in the store, as far as I’m concerned,” he said.
Source: Swifteradio.com
