Tricking Giftcards Into Acting As Credit Cards Costs Wal-Mart $225,000—Almost

Written by Frank Hayes
August 17th, 2011

A gang of Wal-Mart thieves has come up with a novel way to use stolen payment-card data: Skim the mag-stripe data from credit cards in California, copy the stolen tracks onto Citibank giftcards in New York and use the giftcards to buy hundreds of thousands of dollars in merchandise—but only at checkouts staffed by members of the gang, so the fraud won’t be immediately spotted. (Giftcards just happen to be the most easily available blanks. Once the mag-stripe tracks from a credit card are on the giftcard, it is magnetically identical to a regular credit card—it just doesn’t look like one.)

That approach is how six members of a Long Island theft ring—which included four Wal-Mart cashiers—allegedly walked off with $225,000 in merchandise. Well, almost walked off: The six were arrested on August 9 at the Wal-Mart in Uniondale, N.Y., and charged with grand larceny and possession of “forged instruments.”

According to Nassau County police, they were alerted by Wal-Mart security about four cashiers who had been involved in what were apparently card-present transactions. But the actual accounts belonged to cardholders in California, whose mag-stripe data had apparently been stolen using skimmers, and then re-encoded on the giftcards.

“When these four employees were working, two men would come in and start to buy merchandise and additional giftcards that they could use to re-encode,” said Detective Lt. Kevin Smith of the Nassau County police department public information office.

The two outside thieves allegedly concentrated on electronics and other high-ticket items, and then paid with the giftcards containing stolen payment-card mag-stripe tracks. “They’ll go in with this giftcard, and it’s actually maybe somebody’s MasterCard or Citibank card, and that account just starts to drop,” Smith said. That added up to more than $125,000 lost to Wal-Mart and more than $100,000 to Citibank.

But having the outside thieves do the heavy lifting wouldn’t have been possible without the insiders. Ordinarily, giftcards are relatively low-value and low-risk for retailers—the most a thief could steal is what’s already on the giftcard. Without a friendly cashier to intentionally avoid noticing that what looked like a giftcard was processing as a credit card, the thefts would never have worked.

At least there was one bright side to the incident: While police were at the Uniondale Wal-Mart arresting the inside members of the gang, the two outside members walked in. They were arrested, too—carrying a total of 15 re-encoded Citibank giftcards.


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Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

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