Congress Urged to Combat Food Stamp Fraud, Estimated Losses of $25 Billion Annually
By Scott McLallen (The Center Square)
In the face of a looming deadline to renew the Farm Bill, a security expert is calling on Congress to prioritize the reduction of food stamp fraud. Haywood Talcove, CEO of LexisNexis Risk Solutions’ Government Group, which provides fraud prevention tools, has revealed that approximately 20% of the Supplemental Nutrition Assistance Program’s (SNAP) annual budget, amounting to $25 billion, is likely lost to criminals.
Talcove, who works with 26 state unemployment programs and 50 U.S. banks, highlighted the prevalence of fraud during the pandemic, as criminals successfully targeted the Paycheck Protection Program and state unemployment insurance programs. Now, they have turned their attention to food stamps, which provide a social safety net to around 40 million people, costing taxpayers an estimated $24 to $36 billion annually.
One of the main issues contributing to this fraud is the vulnerability of legitimate recipients’ cards. Talcove emphasized that the processes and systems put in place by the U.S. Department of Agriculture (USDA) are failing to effectively prevent card theft. As a result, individuals in need are suffering the consequences of delays in recovering their funds. Talcove suggested that replacing point-of-sale terminals and electronic benefit transfer cards with a chip-enabled option could help combat this issue.
A spokesperson for the USDA’s Food and Nutrition Services acknowledged the challenges posed by food stamp fraud but stated that the organization currently lacks sufficient data to estimate the national scope of the problem. However, they mentioned that national skimming data is expected to be published later this year. In December, Congress passed a law allowing for the replacement of stolen SNAP benefits through card skimming and cloning between October 2022 and September 2024.
In response to the ongoing issue, some states, in collaboration with the FNS, are piloting chipped cards as a potential solution. However, there are currently no federal funds allocated for the implementation of these cards. Furthermore, in an effort to detect and prevent fraud, FNS offered $5 million in grants for states in fiscal year 2023. Nevertheless, Talcove argued that due to the lax security measures, the USDA inadvertently contributes to cyber fraud on a large scale.
To illustrate the severity of the problem, Talcove referred to a recent case in Atlanta, where the owner of Big Daddy’s Meat Market pleaded guilty to a $10 million scheme involving the redemption of SNAP benefits at a reduced rate. Criminals would pay customers 50 cents on the dollar to use their benefits in the scheme that spanned from 2015 to 2020.
The fraud scheme involves burning the retailer’s SNAP number onto a point-of-sale terminal and selling it on the dark web, allowing counterfeit transactions to appear legitimate, as they originate from recognized retailers like Walmart, Sam’s Club, B.J’s Wholesale Club, or Target. Talcove emphasized the urgency for Congress to take action and improve the program, citing polling data that indicates 71% of Americans want eligibility requirements enforced.
Addressing the issue of food stamp fraud is crucial to ensure that assistance reaches those most in need. With an estimated annual loss of $25 billion to criminals, it is imperative that Congress prioritizes the renewal of the Farm Bill and implements stricter regulations and security measures to safeguard taxpayer funds. By investing in chip-enabled cards and enhancing fraud prevention tools, Congress can take an essential step toward reducing food stamp fraud and protecting vulnerable populations from exploitation.
