The fraudulent use of loyalty cards can occur when employees abuse their own or a family account to increase personal rewards through cash equivalents such as vouchers or discounts.
Typically a cashier will add the unwanted points from a customer's transaction to their own account or, if the functionality allows, just manually add points to their accounts directly through the till. It is quite common for cashiers to collect large numbers of unwanted 'points' receipts from customer transactions and take these to other branches to add value to their personal account.
As points are typically converted to cash equivalents or discounts the effect of this type of fraud on profitability through margin erosion is significant.
This is a potentially invisible fraud with no physical evidence to be found upon a cashier if account details are memorised.
Gift card (also often referred to as refund cards) misuse is an emerging issue. Designed to replace paper vouchers they allow value to be added to them in a similar way to paper vouchers without the need for a reconciliation process. Cashiers can add value to them simply though the till as a normal sale and pass them to another to avoid detection through search ? as an alternative to cash theft. This is no different to the old fashioned method of stealing gift vouchers. Often fraudulent refunds are credited to gift cards (see refund fraud).
Multiple purchase of gift card using a credit card is a way of quickly generating cash equivalents from stolen credit cards. Gift cards can then be traded on the open market or used to buy goods later on.
Multiple redemption of gift cards used in high value purchases will often indicate part of the cycle of an organised abuse of a refund policy using stolen goods.