$181 Million Drained from California Residents’ Accounts

California has a robust welfare system, but that doesn’t mean that it’s free from fraud. Recently, nearly $200 million designated for low-income families was withdrawn through EBT accounts through unauthorized ATM withdrawals. Let’s see how this has affected California’s public welfare system.

Seven Arrested For the Crime

Last Thursday, the U.S. Attorney’s Office for the Southern District of California, alongside the Secret Service, announced the arrest of seven people they say were responsible for the scheme.

Sources say that between June 2022 and February 2024, these individuals exploited security vulnerabilities to access the fund illegally and drain it, depriving those in the state who needed the funds.

Not A Thing Just In California

According to the Secret Service, exploiting the EBT system is not a new practice. Bad actors bypass the system’s checks and balances, and it’s been happening all over the United States.

The Secret Service also notes that it will go to considerable lengths to ensure that the EBT system remains protected by pursuing and prosecuting all those involved in exploiting it.

Skimming Devices Used

Investigators say that the bad actors involved in this particular scam installed skimming devices in ATMs and point-of-sale terminals around the US to collect card information.

Using this information, these criminals could recreate these ATM cards on copies, using them to withdraw a massive amount of funds overall, stealing from the people who needed the money.

How Do Skimming Devices Work?

When a card is swiped or inserted, the device reads and stores the data from the card’s magnetic stripe or chip. Concurrently, a small camera or keypad overlay records PIN entries.

With this data, criminals can create cloned cards or conduct fraudulent transactions. Vigilance, covering PIN entries, and checking for unusual protrusions on card readers can help thwart such schemes.

Cloned Cards Can Be Any Type of Card

Cloned cards are cards with magnetic strips that copy the information from a skimmed card. They can be blank or have existing magnetic strips.

Demagnetizing the strips destroys the information on the card, which can then be reprogrammed to accept the cloned data. It’s a simple process that almost anyone can do.

Criminals Used PIN Records For Transactions

PINs or personal identification numbers are a method of securing the card from unauthorized use. However, the skimming method used by these criminals bypassed that security measure.

The criminals would use a camera to record the pin entered into an ATM or POS machine. Once they caught the pin, they had no problem using it in their own transactions with a cloned card.

PINs Written Down to Avoid Confusion

Investigators found several dozen cards with PINs written down on them so the criminals wouldn’t get confused when using them. These cards had no identifiable cardholder information.

One of the most critical security measures banks tell customers is never to write their PIN on a card, but if you’re a criminal, this just makes it easier, and since it’s not your money, you don’t care if someone else sees it.

EBT Fraud Makes Poor People Suffer

The Electronic Benefit Transfer (EBT) system electronically delivers government benefits such as food stamps and cash assistance. Help is granted to the most financially vulnerable people.

Recipients are issued a plastic card similar to a debit card, which they use to access their benefits at authorized retailers and ATMs. Criminals cloned this card to illegally access these funds.

Supposed to Ensure Equal Distribution of Benefits

EBT is supposed to ensure efficient and secure distribution of benefits, reducing administrative costs and fraud. These fraudsters make the system more complex.

It also offers recipients convenient access to essential resources, improving their quality of life and promoting socioeconomic stability. Because of this activity, many families lost access to their funds.

A Sad State for Families Depending on EBT

U.S. Attorney Tara McGrath noted that the fraud perpetrated on the EBT system was likely for children starving and households facing even more financial stress.

Any parent who didn’t know their card was compromised would make it to the grocery only to realize that they had no more funds in their EBT account since it had been drained by the fraudsters.

Possibly Part of a Larger Network

Looking into this situation, the Justice Department noted that the operation was complex and multi-layered. This hinted that the perpetrators were possibly part of a larger organization.

If this is true, then this plan to defraud the state’s EBT benefits might be even more wide-ranging than first thought. Their methodology benefited from the laundering of the funds since they were harder to trace.

California Among the Largest EBT Beneficiaries

California uses EBT funds the most. The U.S. Department of Agriculture says California leads the country in the number of transactions and benefits paid.

However, not every California family can benefit from the EBT program. Only families below a certain income threshold can access the program to ensure it reaches those in the highest need.

Income Guidelines Underline The Neediness Of the Recipient

A single Californian’s income must not exceed $2,430 per month, and a family of four must have income below the $5,000 threshold to qualify for the program.

California’s government says that these income limits and thresholds are vital to ensure that the EBT program is not abused and that it reaches the people who need the support the most.

EBT Fraud Is Stealing from the Poor

Criminals come in all forms, but those who seek to prey on the poor are the worst of the lot. EBT benefits are geared towards offering support to those who are having a hard time making ends meet. Many criminals think that taking money from the state is justified, but if it’s from the EBT program, it’s the poor that are hit the hardest.

Stealing money from these people not only deprives them of a necessary source of income but also puts them in a financially precarious situation and might lead to significant issues, both social and financial, for them later on. California is already not a good place for those without economic security to live. EBT fraud just makes it even more difficult for the poorest.