Gift cards offer businesses a convenient way to reward employees and thank customers. However, as the FBI recently warned, gift card scams specifically targeting companies are on the rise. Since January 2017, losses from such fraud schemes have surpassed $1 million. Here is what you need to know to avoid being cheated.
Anatomy of a scam
Fraudsters use classic ‘spoofing’ strategies to execute what law enforcement calls Business Internet Compromise (BIC) scams. They email or text an employee, claiming to be someone who can authorize gift card expenditures, such as the company’s chief executive officer or human resources director.
Messages typically instruct the employee to purchase gift cards for the executive to give as gifts or to use for office expenses, such as holiday party supplies. The employee is told to send the gift card information, including card numbers and PINs, back to the ‘executive’ (in reality, the scammer) who then cashes out the cards’ value. By the time the business catches on, it is already too late to recover the stolen funds.
All companies are vulnerable to this type of fraud. However, certain sectors seem to be at increased risk, including real estate, legal, medical, and distribution and supply businesses, as well as non-profit organizations.
Prevention starts with education. Inform employees about the scam and ask them to be on the lookout for emails or texts that ask them to buy multiple gift cards on someone else’s behalf. They should be particularly suspicious if the email urges them to act quickly or to reply with the gift card numbers and PINs.
As an added precaution, require employees to follow up on any electronically delivered purchasing request with a phone call to the requesting party. In addition, to reduce the chance that employees will receive spoofed emails, ensure that your network security is robust and up to date.
Report & control
The FBI asks businesses to report BIC gift card incidents to its Internet Crime Complaint Center via its website. Also contact us for help – we can help you implement strong internal controls to prevent fraudsters from taking advantage of unsuspecting employees.