USDA takes action against EBT skimming after rising Visa scams

In a move to combat rising fraud risks, the U.S. Department of Agriculture (USDA) is strengthening security measures for Electronic Benefit Transfer (EBT) cards, focusing on protecting vulnerable recipients from skimming scams.

This initiative aligns with the findings of Visa’s latest State of Scams report, which highlights an uptick in consumer fraud and evolving scam tactics that threaten both payment systems and individuals. As the USDA begins transitioning to more secure EBT card technology, the report underscores the need for comprehensive security enhancements across the financial landscape.

Skimming scams on EBT cards

EBT cards, unlike standard debit and credit cards, lack chip technology, making them a prime target for skimming scams. These scams involve criminals covertly installing devices on card readers to capture sensitive data, including card numbers and PINs. Armed with this information, scammers create counterfeit cards, allowing them to drain funds without the cardholder’s knowledge.

The financial toll of skimming scams is staggering: since January 2023, the USDA has recovered nearly $95 million in stolen Supplemental Nutrition Assistance Program (SNAP) benefits.

This significant loss underscores the urgency of securing EBT cards and protecting federal aid recipients from fraud. In response, the USDA is implementing a phased rollout of chip-enabled EBT cards, aiming to deter criminals and reduce unauthorized transactions.

Visa’s report supports this initiative, noting a concerning rise in physical skimming attacks on EBT cards. As scammers grow more sophisticated in their tactics, the USDA’s shift toward advanced card technology is a critical first step in fortifying security for low-income beneficiaries. The enhanced security measures aim to offer greater protection against fraudulent activities, safeguarding the funds of those most in need.

Visa’s report exposes scam techniques

Visa’s State of Scams report shines a light on an expanding arsenal of scams affecting consumers and financial institutions alike. Among the highlighted threats are government impersonation, token provisioning fraud, and phishing attacks that bypass two-factor authentication (2FA). These scams illustrate how criminals are evolving to exploit both technological vulnerabilities and social engineering tactics.

Government impersonation scams, for instance, have seen a sharp rise in recent years. Fraudsters, posing as officials from agencies like the U.S Postal Service (USPS), deceive victims into divulging personal and financial information.

Between 2022 and 2023, losses attributed to government impersonation scams soared by 90%, with average individual losses reaching $14,000. In total, such scams have cost consumers over $20 million, underscoring the need for awareness and preventive measures.

Phishing scams that circumvent two-factor authentication represent another formidable threat. Scammers craft convincing emails, texts, or calls to prompt users to reveal one-time passwords (OTPs), allowing them to bypass added security measures and gain unauthorized access to accounts.

The increasing sophistication of artificial intelligence (AI) has amplified these scams’ effectiveness, as AI-generated messages mimic authentic communication, lowering users’ defenses. The rapid adaptation of scammers highlights the importance of ongoing improvements in authentication technology to stay ahead of these tactics.

Token provisioning fraud is a newer but rapidly growing concern. This scam targets the digital tokenization of card data—a security measure meant to protect payment information during online transactions. Criminals obtain tokens through unauthorized means and often delay using the compromised information to evade detection. Visa’s report notes that this delayed approach enables scammers to slip under the radar, challenging financial institutions to detect and combat such fraud effectively.

Financial institutions fighting evolving scams

The responsibility to prevent fraud extends beyond individual consumers; financial institutions are also critical players in tackling these emerging threats. Visa’s report underscores the necessity for banks and financial institutions to adopt a proactive stance, which includes implementing advanced security technologies, continuously monitoring accounts, and educating consumers.

One of the key security measures urged by Visa is the adoption of stronger authentication protocols. This could include biometric verification methods such as facial recognition or fingerprint scanning, which add an extra layer of security beyond passwords and OTPs. Coupled with machine learning algorithms that can flag unusual account activity, these tools offer financial institutions an effective defense against unauthorized access.

Continuous monitoring of transactions is another crucial strategy, enabling institutions to quickly detect irregularities and potentially stop fraud in progress. Some banks are already investing in real-time monitoring systems that can analyze transaction patterns and flag suspicious behavior.

By identifying deviations from normal activity, these systems alert security teams to potential fraud, allowing them to intervene before substantial damage occurs.

Consumer education is equally important. Financial institutions play a vital role in equipping customers with the knowledge needed to recognize scams and protect themselves. This involves promoting awareness of current scam tactics and sharing practical advice on avoiding phishing attempts, authentication bypasses, and skimming scams.

For example, banks can encourage customers to avoid sharing OTPs with anyone, verify suspicious messages or calls, and regularly review account statements for unauthorized transactions. Empowering consumers with information not only helps prevent individual losses but also contributes to a more secure financial ecosystem overall.

Approach to strengthening payment security

As the financial landscape grows increasingly digital, securing payment systems against new and evolving threats becomes imperative. Recent ransomware attacks highlight the far-reaching impact of cybercrime on both consumers and organizations. Visa’s report reveals a 24% rise in complex ransomware incidents, with third-party providers—such as cloud and web hosting services—being prime targets.

In one case, a ransomware attack on a third-party provider affected approximately 2,620 organizations and compromised the data of 77.2 million individuals. This incident illustrates the ripple effect of cybersecurity breaches, emphasizing the importance of a multi-layered approach to safeguarding sensitive information.

For the USDA, the rollout of chip-enabled EBT cards represents a significant advancement in addressing the skimming threat. However, preventing fraud on a broad scale will require concerted efforts involving regulatory bodies, financial institutions, and payment processors. Collaborative strategies that blend regulation, technological innovation, and public awareness are essential to building a resilient payment system.

From a regulatory perspective, stricter standards and oversight are necessary to prevent skimming and related scams. Encouraging the adoption of chip and PIN technology across all government-issued cards, such as EBT, would enhance security and bring these cards in line with industry best practices.

Additionally, implementing stiffer penalties for skimming crimes could act as a deterrent, signalling that such activities will be met with serious consequences.

For financial institutions, Visa’s report highlights the need to foster a culture of cybersecurity awareness. This involves not only training staff to identify and prevent fraud but also cultivating partnerships with regulators and other financial entities to share information on emerging threats. By creating a unified front against cybercriminals, institutions can respond to and mitigate fraud more effectively.

Educating consumers on best practices remains a crucial defense against scams. Awareness campaigns that inform the public about the latest tactics, like phishing schemes and government impersonation scams, enable consumers to take preventative actions.

Practical advice—such as regularly monitoring account balances, setting up alerts for unusual transactions, and avoiding public Wi-Fi when making financial transactions—can empower individuals to protect themselves. In particular, EBT cardholders should be encouraged to remain vigilant, inspect card readers for tampering, and promptly report any suspicious activity to authorities.

Moving towards a secure payment future

With skimming scams on the rise, the USDA’s proactive steps to secure EBT cards signify a critical movement towards safer payment systems for federal aid recipients. However, as Visa’s report reveals, the landscape of fraud is constantly evolving. Financial institutions, regulatory bodies, and consumers must work together to combat these challenges.

Enhancing security protocols, advancing authentication technologies, and educating consumers on the threats posed by skimming, phishing, and token provisioning fraud are all crucial in developing a robust defence against cybercrime. Through collective action, stakeholders can safeguard payment systems and create a more secure environment for financial transactions.