alt Hacker NewsI suspect the underlying problem is that the gap between legitimate use of gift cards and fraudulent use of gift cards is just not very large...
Years ago I briefly played around with "manufactured spend" (on credit cards, to earn frequent flyer miles).
There was one specific loophole, with one specific gift card provider, and it was a doozy. You could earn credit card points on spend, plus supermarket loyalty points on spend, by buying gift cards from one specific provider which could be cashed out at face value (ie no fee at all) immediately to a specific type of savings account.
So, of course, world+dog was buying these things like it was the end of the world.
As I sat in a hotel room one evening rubbing the security codes off the latest batch of cards before redeeming them one-by-one into my savings account, it dawned on me that what I was doing was basically indistinguishable from money laundering. Of course it was NOT money laundering, but it would take some time to explain exactly why not...
The loophole was closed relatively quickly, and the gift card provider gave up.
Replies
> but it would take some time to explain exactly why not...
Not really:
"I'm churning credit cards for the rewards points. Here is the receipts where I use $10k from account A to purchase $10k worth of gift cards. Here is the statements where I deposit $10k of gift cards into account B. Here is the statement for the $10k wire from B to A. And here are the receipts for the next round of gift cards I purchased. Any further questions? I have $10k of gift cards to redeem."
> the gap between legitimate use of gift cards and fraudulent use of gift cards is just not very large.
And many legitimate uses of gift cards may actually have been fraudulent somewhere up the chain.
Imagine a scammer which sells their cards to real users (perhaps through one or more less-than-scrupulous intermediaries willing to buy them in crypto without asking too many questions). If the victim comes to their senses and somehow gets those cards reported and blocked as fraudulent, unsuspecting users will get into trouble.
> it dawned on me that what I was doing was basically indistinguishable from money laundering. Of course it was NOT money laundering
But it is money laundering, that's what manufacturing spend is. It's not money laundering to hide evidence of a crime, but it is money laundering for the purpose of hiding the fact that you didn't engage in commerce in the process of spending money on a credit card to earn a reward. It's indistinguishable, only because we criminalize behavior not only on its base but due to its intent.
I did this ages ago to build up airline points and take a nice trip to the EU.
Back then, the trick was to get a generic Vanilla Visa or other prepaid credit card. A recent legal ruling meant they had to be run as a debit card for... reasons... I forget them.
But a lot of grocery stores would sell you a money order up to 500 bucks for under a dollar with a debit card (not a credit card).
So you'd call up the issuer and have them issue it a PIN. Then you'd run it as a debit card and buy a 500 dollar money order.
Subtract ~$5 for the GC and ~$1 for the MO and you could manufacter about 500 bucks in spend. And the best part? You could take that money order to your bank, deposit it, get the funds immediately, pay off your balance, then rebuy.
In one afternoon I earned enough points for a first class flight to a fancy European city, and eternal side eye from the grocery store clerks who were convinced I was up to something put couldn't put their finger on what.