Chipped cards alone won’t stop Michigan SNAP thieves, expert warns

Even after closing a major security loophole in its food stamp program, Michigan will face a serious threat from electronic benefit fraud, according to an expert.

The state is upgrading its Supplemental Nutrition Assistance Program cards following a Michigan Capitol Confidential series that exposed $14 million worth of stolen food benefits.

But the state must take more action to protect about $230 million transferred each month to 1.4 million Michiganders, according to Haywood Talcove of LexisNexis Risk Solutions, a company banks and unemployment agencies use to help prevent fraud.

Upgrading benefit cards is a good step, Talcove wrote in an email to CapCon, but Michigan must focus on retailer integrity, technology controls, and data sharing, while ensuring legitimate beneficiaries continue to receive timely access to food.

Roughly 10,000 retailers can accept SNAP cards for payments, according to a state dashboard that tracks them. Of those 10,000, about 5,000 are convenience stores and 2,000 are “other” entities. There are 664 qualified grocery stores, 723 superstores, and 341 farmers or farmers markets that qualify, as well as 324 restaurants.

It’s hard for state and federal employees to police 10,000 SNAP retailers, especially when a large percentage of them are convenience stores or gas stations, Talcove said.

State and federal officials must raise the bar for becoming and remaining a SNAP retailer, Talcove said. He pointed to Massachusetts, where $7 million of fraud took place through two tiny stores that redeemed up to $500,000 in benefits each month despite having few cash registers or grocery carts.

Talcove recommended that state and federal authorities make a concerted effort to screen retailers, audit businesses on a regular basis and move more quickly to remove high-risk or non-compliant stores from the program.

Michigan must crack down on cloned and compromised point-of-sale devices that fraudulent retailers use to commit fraud by using the names of legitimate businesses, which lets them siphon benefits at scale, he said.

States must do a better job of sharing data with each other and the federal government, Talcove said, because criminals try to scam the benefit programs of multiple states.

“Protecting program integrity is not at odds with ensuring the poorest residents can eat — in fact, it’s essential to it,” Talcove wrote. “Every dollar lost to fraud is a dollar that does not reach a family in need. With better retailer oversight, modern fraud detection, and meaningful data sharing, we can reduce abuse while preserving — and strengthening — trust in the SNAP program.”

CapCon obtained monthly SNAP redemption records from the United States Department of Agriculture through a records request. The state health department did not respond to a request for comment.