EBT SNAP Fraud: A Growing Multi-Billion Dollar Problem

Electronic Benefits Transfer (EBT) fraud, which targets the Supplemental Nutritional Assistance Program (SNAP), is on the rise and estimated to cost $4.7 billion annually in the US. Not only are tax dollars diverted into the hands of fraudsters, but these crimes also impact the most vulnerable in society: those below the poverty line who lose the ability to provide food and shelter for themselves and their families. Unfortunately EBT Fraud is a national issue affecting every state.

Cloned EBT cards, acquired through card skimming devices on ATMs and retailer point of sale terminals, are a major contributor to the increase in benefits theft. Outdated card technology and a lack of real-time transaction fraud detection make EBT programs a prime target for fraudsters.

For example, in one Northeastern state, 1 out of 8 households receive supplemental benefits with thousands experiencing stolen SNAP benefits every year. The state also incurred additional costs associated with claim investigation and administration. Here is how this state tackled the issue head-on.

How technology quickly addressed this problem

To stem the increase in EBT fraud and to meet recent federal reporting guidelines, this state sought a technology partner who could rapidly address these needs. Over the past decade, the state had put in place analytics solutions to help evaluate SNAP transactions, but this was simply not sufficient given the increase in EBT fraud. They turned to INETCO to protect the state and its beneficiaries from the sophisticated fraud attacks of today and instantly flag activities such as:

  • The use of compromised cards and stolen card credentials
  • Withdrawal of funds from someone other than the beneficiary
  • Purchases originating out of state
  • Inappropriate expenditure of funds

INETCO’s cost point, agility, and proven transaction fraud expertise made it the ideal partner to:

  • Proactively detect the misuse of funds
  • Reduce the value of funds stolen
  • Validate and replace stolen benefits rapidly
  • Expedite notification to beneficiaries
  • Report on the scope of the problem

Together, this state and INETCO are turning the tides on SNAP fraud.

INETCO BullzAI: A partnership like no other

One of the key reasons why this state chose INETCO BullzAI is because it is the only fraud solution that sees the complete SNAP transaction as it is processed, enabling it to identify fraud precisely and instantly. INETCO BullzAI is a unique, intelligent, AI-driven payment protection platform that detects fraudulent activity from skimmed cards and accounts that have been taken over. It can, as an option, decline them before the transaction has completed. INETCO creates unique profiles for every cardholder and can identify individual fraudulent payment activities in real-time, with in-depth data for payment fraud analytics that are not available with other systems.

INETCO enables this state to confidently monitor over 10 million EBT card transactions per month for potential fraud. Examples of alerts includes:

  • When the EBT card is used to perform an excessive number or value of cash withdrawals, or an excessive number of purchases.
  • When the EBT card is used to make cash withdrawals out of state, or used to make in-state purchases with the purchase originating from out of state.
  • When transaction values, frequency, or location differ from expected card behavior.
  • When transactions are conducted from an implausible number of devices in a short period of time (e.g. using the same card at several retailers or ATMs).

When alerts are triggered, fraud analysts at the state have access to all relevant information on a dashboard, and they can drill down for further details. INETCO BullzAI provides a clear description of the activity that triggered the alert, removing the need for fraud analysts to perform root cause analysis.

Since BullzAI’s deployment, this state now safeguards its SNAP program by identifying fraudulent behavior for which they had no previous visibility. Of particular value has been the capability to identify fraud originating out of state and the associated data. In these cases it is easy to validate the fraud and issue new EBT cards to beneficiaries (often without an interruption of benefit). Furthermore, the state has been able to provide valuable information to law-enforcement authorities.