The Fraud Examiner

Food Stamp Fraud Gets High-Tech

January 2012 

By Laura Telford 


The Supplemental Nutrition Assistance Program, or SNAP, began as the Food Stamp Program (FSP) in 1939, and was set up to aid low-income Americans during the Great Depression. In 1964, FSP got a makeover and adopted a way to get much-needed food to these Americans, a mechanism that became more commonly known as “food stamps.” The Food Stamp Act of 1977 fostered significant changes in program regulations, eligibility, and administration. In the 1990s, food stamps were overhauled once again, and SNAP benefits are now distributed on electronic benefits transfer (EBT) cards instead of the easily transferred paper coupons.

The USDA Food and Nutrition Service (FNS) oversees SNAP via 53 state government agencies. Once an applicant is approved to receive food stamp benefits, he is issued an EBT card, which is essentially a debit card for purchasing food. Each month, a predetermined amount of food benefits is made available to the participant.

Food stamp recipients can use their benefits to purchase food at licensed stores (which include most grocery stores). The SNAP recipient swipes their EBT card at the cash register, just like a debit or credit card, and enters a PIN. The information is transferred to the processing facility to determine the validity of the card, the level of available benefits, and whether or not the retailer is authorized by the FNS.

Participants can use SNAP to buy any food or food product for human consumption, and seeds and plants for use in home gardens to produce food. The types of items that may not be purchased with SNAP benefits include alcohol and tobacco; ready-made, hot foods; vitamins; pet food; and non-food items (except seeds and plants).

Food Stamp Trafficking 

Though the use of electronic benefits transfer (EBT) cards has helped curb the illegal trafficking of food stamp/SNAP benefits, it has by no means eliminated it completely. Some SNAP recipients sell their EBT cards for cash for less than face value. This activity is known as food stamp trafficking.  

A common food stamp trafficking scheme is when a recipient of SNAP benefits uses his EBT card to obtain cash from a participating store. The disreputable salesperson rings up a small purchase, then adds an extra amount to the total that is deducted from the card. For example, the SNAP customer purchases a drink for $1.99, the cashier charges his EBT card $41.99, pockets $20 and hands $20 to the customer. In this way, a SNAP recipient receives funds that are designated for food purchases only. The customer is then free to use the cash however he wants — and the salesperson pockets his share.

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