Romanian Gangs Use Mag Stripe EBT Cards in Welfare Theft

PYMNTS reported that criminal networks based in Romania and operating within the U.S. are diverting hundreds of millions of dollars from government benefit programs. The scheme exploits electronic benefit transfer (EBT) cards, which continue to rely on magnetic strip technology first developed in the 1960s. The Wall Street Journal, which broke the story on Sept. 20, noted that investigators identified “builders” who assemble skimming devices difficult for merchants to detect.

Proceeds from the theft are converted into cryptocurrency and sent to Romania, where they fund luxury purchases. While the White House has intensified efforts against benefits fraud, the Journal found that offenders are broadening their methods. This includes employing bots to guess account numbers and executing fraudulent transactions through cloned card readers. Michael Peck, who heads the Secret Service’s Global Investigative Operations Center, stated, “Sadly, business is booming.”

Few states have adopted chip cards or contactless payment systems for EBT, leaving magnetic stripe cards as the primary target. Haywood Talcove, CEO of LexisNexis Risk Solutions’ government business, condemned the continued use of outdated security, saying, “The insanity of letting people continue to use a glorified hotel-room key is akin to donating money to the Romanians.”

New research from PYMNTS Intelligence indicates that fraud is increasing costs for card issuers. The report, “The Issuer Risk Playbook: Building Trust, Fueling Growth,” found that 45% of issuers with high customer lifetime value intend to fund fraud prevention and detection initiatives over the next 12 months.