IG Office Announces 2024 Fraud, Waste and Abuse Awareness Effort

A recent gift card scam that made headlines during the 2023 holiday shopping season reveals how prevalent fraud is in our society. The fraud technique, known as gift card draining, has been made easier and more widespread via bot-driven technology. Although this was a common occurrence with many retailers, no known incidents were reported involving the Exchange.

The scammers entered a store where most gift cards were left unattended and unsecured. They removed the silver strip over the gift card’s PIN, made note of the card number and PIN and then replaced the silver strip. The customer purchasing the gift card had no reason to suspect a scam as the card was restored to its original appearance.

When the customer went to use the card, however, the scammers were able to steal the funds the customer had just loaded at the register, ripping off both the customer that made the legitimate purchase and the store that sold the cards. Because the scammers already had access to the card information, perpetuating this fraud is an easy crime to carry out. According to the Federal Trade Commission’s Consumer Sentinel database, gift card scams have led to an estimated consumer loss of $224 million in 2023 alone. Aside from the consumer and retail companies’ losses, this type of fraud can shake consumers’ confidence about ever purchasing a gift card again resulting in potential lost sales revenue.

During the past five years, fraud at the Exchange Inspector General (IG) Office represent less than 3% of our total IG Hotline intakes. This suggests the Exchange’s efforts to prevent fraud seem to be working. However, the Exchange cannot become complacent.

We attribute our great record to the enterprise-wide mechanisms that are in place to prevent fraud. These include the tone set by leadership, internal controls, an intolerance of fraudulent behavior and, most important, an IG Hotline that allows associates or customers to report instances of fraud, waste, abuse or mismanagement. In its 2022 Report to the Nations, the Association of Certified Fraud Examiners noted that maintaining a hotline or reporting mechanism increases the chances of earlier fraud detection and reduces overall losses.

The Exchange’s IG Office continues to make Fraud, Waste and Abuse (FWA) awareness a priority, surveying at large cross-section of associates at least every three years. The 2024 fraud awareness effort includes the IG Office featuring articles related to fraud, waste and abuse, culminating with the results of an enterprise-wide fraud awareness survey. More information regarding the survey will be announced closer to its release in October.

Stephen Groll is vice president, Exchange Inspector General.