Recently, gift card scams have become a sophisticated and common method fraudsters use to swindle money from unsuspecting victims, including small businesses and their employees. Understanding how these scams operate is your first line of defense. So let's dive in!
Most Recent Scam Alert:
A new scam targeting small business employees is being launched by impersonators claiming to be police officers. They allege that someone, potentially the business owner, is in custody and urgently request the employee’s cell phone number and the amount of money in the register.
The scam progresses with demands for purchasing a gift card in the amount available in the register and sharing the gift card details with the scammer, claiming to be the officer to bail out the owner or person in jail.
While it may seem unbelievable as you read this, scammers are incredibly convincing. They create a strong sense of urgency and panic, leaving little time to think clearly in the moment—especially for younger employees who may not be equipped to handle such pressure.
Educating Your Team:
It is crucial to inform your employees about these scams. Advise them never to disclose personal or business information over the phone. If they receive such calls, they should:
• Directly contact you, the business owner, to relay the information. If you are not available, they should have an emergency contact number ready.
• Hang up and call the police department to verify the authenticity of the claim.
Prepare for the Unexpected: Why Every Business Needs a Scam Prevention Plan
As business owners, preparing for scams may not always be top of mind, but with new scams constantly emerging and technologies like AI evolving to include capabilities such as voice cloning, it’s essential to have a solid plan in place. This should be as comprehensive as any disaster recovery plan.
Take the time to educate your employees about potential scams. Clearly outline the protocols they should follow if they encounter a suspicious situation. Informing them about the steps to take can prevent your business from losing thousands of dollars to scammers. Remember, no one ever expects to be targeted by a scam until it happens. By preparing your team now, you can safeguard your business against these evolving threats.
"In 2023, card draining and other gift card-related fraud made up $217 million of the record $10 billion in money lost from scams nationwide, according to the latest data released by the Federal Trade Commission."
How Do Gift Card Scams Work?
Gift card scams typically start with a scammer posing an urgent need for money and demanding payment through gift cards from well-known retailers like Amazon or Walmart. These payment methods are preferred by scammers due to their fast processing and difficulty to trace.
Types of Gift Card Scams:
1. Gift Card Payment Scams: Where scammers demand payments for fake emergencies.
2. Gift Card Draining: Where scammers deplete the value of a card before the owner can use it.
Why Do Scammers Want Gift Cards?
Gift cards provide an anonymous, quick, and untraceable means for scammers to extract money. Once they have the card details, they can either drain the funds or sell the information quickly.
How To Identify a Gift Card Scam: 6 Warning Signs
While gift card scams can appear sophisticated, there are distinct warning signs that can help you identify and avoid them. Here’s what to look out for:
Unusual Payment Requests: If you’re asked to pay for services or debts with gift cards—especially from supposed representatives of the IRS, banks, or utility companies—it’s a scam. Legitimate institutions never request payment via gift cards.
Questionable Fund Transfers: Be wary if someone instructs you to use gift cards to move funds or “protect” your bank balance. Real banking transactions and security measures do not involve gift cards.
Created Urgency: Scammers often create a sense of urgency, claiming that gift cards are needed to prevent account closure or fraud. This is always a false claim.
Demanding Phone Supervision: If the person insists on staying on the line while you purchase gift cards, it’s a scam. Legitimate businesses do not operate this way.
Security Lapses in Stores: Scammers may exploit poorly secured retail displays of gift cards, copying numbers for later use. Always be cautious and check the packaging for tampering.
Unbelievable Deals: Be skeptical of offers selling gift cards at significantly reduced prices. These are often scams involving stolen card details.
If You Suspect a Scam, Here’s What To Do Next:
If you’ve unfortunately paid a scammer with gift cards, take swift action to mitigate the damage:
• Document Everything: Gather all related documents such as bank statements, receipts, and any communication from the scammer like phone numbers, emails, and text messages.
• Cease Communication: Immediately stop communicating with the scammer. Continuing to contact them could lead them to cover their tracks further.
• Freeze Your Credit: If your credit card information or Social Security number was compromised, freeze your credit immediately. This prevents the opening of new credit lines in your name. Contact each of the three major credit bureaus to do so:
• Equifax
• Experian
• TransUnion
• Report the gift card scam to the gift card company right away. No matter how long ago the scam happened, report it. Use the How To Contact Gift Card Companies
• Tell the FTC at ReportFraud.ftc.gov. Every report makes a difference.
Stay Vigilant:
Always be cautious of any unsolicited requests for gift card purchases or sharing of gift card details. Encourage your team to report suspicious activities and always verify the legitimacy of any unexpected request.
Remember, gift cards are meant to be gifts, not payments. If anyone pressures you into purchasing or sending gift cards under any other pretense, it’s a definite scam. Stay alert and protect yourself by understanding these signs and taking quick action if needed.
If you or your employees encounter such scams, don’t hesitate to reach out for assistance or report the incident to the authorities.
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