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Scam artists turn fraudulently obtained gift cards into online cash

By RussCam     Jul 23, 2007 in Internet
Internet scam: gift cards, which were originally purchased online using stolen credit cards, are later converted to “laundered” cash by reselling them on Internet auction and gift card exchange Web sites such as eBay, Craigslist and cardavenue.com.
The next time you see a gift card on sale on the Internet at discounts that seem too good to be true, it may be one of an increasing number of online frauds that some security experts call "cyber money laundering" or "e-fencing."
USA TODAY reports that thieves are using stolen credit card numbers to purchase gift cards online, which they then convert to cash by selling them to the highest bidder on auction Web sites or at discounts on gift card exchange Web sites.
"People have found that purchasing gift cards with stolen credit card information and selling them online is very lucrative," says Joseph LaRocca, vice president of loss prevention at the National Retail Federation.
And — according to Paul Cogswell, vice president of loss prevention and risk services at Comdata, one of the U.S.A.'s largest gift card producers and processors — the ruse helps crooks make use of pilfered credit card numbers before the victim has a chance to deactivate the account. It "extends the life of credit card fraud,” says Cogswell.
After retailers made gift cards popular in the late 1990s, major credit card companies have turned the practice in the U.S.A. into a multi-billion-dollar enterprise, which market researcher TowerGroup says will amount to US$97 billion this year, up from about $82 billion last year.
It is hard to measure how much money might be involved in these frauds, but there does seem to be an increase in the instances of gift cards turning up for resale at eBay, Craigslist and card-exchange sites such as cardavenue.com, plasticjungle.com and swapagift.com. Hundreds of cards have been offered at discounts of 30 to 50 percent.
eBay now lists more than 3,400 for resale. To stem fraud, eBay in 2003 began limiting sellers to offering one $500 or less gift card per week. However, LaRocca, who monitors the resale market, says that policy is routinely violated. Some sellers legitimately resell cards they received as gifts, which they know they'll never use, he says. "But when you start seeing, you have to question where that product came from."
Cards posted for sale on plasticjungle.com must be at least 10 days old so that the issuing merchant has time to flag fraudulently purchased cards. This after two $200 Wal-Mart cards, sold for $125 and $135, and were identified as having initially been purchased fraudulently.
Just one more way for Cybercrooks to prey on unsuspecting web surfers.
More about Cybercrooks, Internet scams, Gift cards