Food stamp fraud is rising, particularly through EBT card skimming, as I discuss in this op‐ed. EBT numbers and PINs are a great target for theft because the cards do not have chips. This is one of many failures that should prompt Congress to downsize the huge food stamp program in this year’s farm bill. The food stamp program is also called the Supplemental Nutrition Assistance Program.
The fraud problem with SNAP and other benefit programs is not just that individuals fake their personal data to gain unjustified benefits, but also that criminals find systematic program weaknesses and exploit them. Federal hand‐out programs are looted by criminal gangs in an organized fashion.
Programs paid for by the federal government and run by the states—such as food stamps—are particularly prone to looting because state administrators have little incentive to worry about costs imposed on federal taxpayers.
This July 4 piece in the San Diego Union‐Tribune caught my eye:
The bulk purchases of Red Bull and Monster Energy drinks were huge. Within about two months late last year, the same small group had spent $305,270 buying pallets of the caffeinated drinks at grocery stores in downtown San Diego and Riverside.
The transactions were large enough that members of the group had to make special arrangements with store managers ahead of time and pick up the drinks in the Smart & Final loading docks. They presumably resold the drinks at a profit — and the profit would be high since the money didn’t even come out of their own pockets.
Instead, the purchases were made with money pilfered from low‐income public benefits recipients.
Last week, a member of the group pleaded guilty in San Diego federal court to one count related to the scheme. Beatrice Mihai, a 25‐year‐old Romanian citizen who lived in Anaheim, admitted in her plea agreement that she and her co‐conspirators stole and misused the Electronic Benefit Transfer funds intended for nearly 175 victims in California, New York, Florida and Rhode Island.
… More recently, Romanian organized crime groups have plundered taxpayer‐funded programs for low‐income Californians, targeting those swiping state‐issued cards loaded with EBT and unemployment benefits. Investigators believe those accounts are being targeted because the state‐issued benefit cards are more vulnerable because they lack the chips embedded on most bank‐issued cards. The theft has become a huge problem.
… On a near‐weekly basis, news reports from across the U.S. — citing police records, prosecutors, court evidence and news releases — demonstrate the links between Romanian groups and ATM skimming operations.
… A few months later, investigators learned about the energy drink scheme at the San Diego and Riverside Smart & Final stores. Prosecutors alleged the group made at least 16 bulk purchases between the two locations in October and November, swiping multiple EBT cards to complete each purchase.
Let me summarize how this works. Gangs put skimmers on card machines at check‐outs in retail stores. They gain dozens or hundreds of card numbers and PINs before the skimmers are discovered. They encode the numbers on new cards and drain food stamp accounts by buying high‐value goods such as energy drinks. They resell the goods for cash to other retailers, typically for 50 cents on the dollar.
EBT card skimming has become a particularly severe problem in recent years. But SNAP is difficult to police in general because it includes 250,000 retailers and 42 million recipients. The program has exploded in cost from $63 billion in 2019 to about $145 billion in 2023.
The solution is to get the federal government out of food stamps and allow the states to fund their own food programs if they choose. State lawmakers must balance their budgets, and so they have strong incentives to minimize fraud and waste when funding their own programs.