Food Stamp Fraud Trafficking – Extending “CREDIT” to Customers

The USDA or United States Department of Agriculture runs the government issued SNAP program that many call the Food Stamp Program. When started, this program issued paper checks that were called “vouchers” to the eligible participants in the program every month. The participants would then have to take these vouchers to the grocery store to purchase the allowed foods and beverages. This program is intended to help very low income individuals and families. New York City has many retailers that participate in this benefit program by providing the eligible food products that customers buy with their snap benefits.

Like any government program, this one had some fraud cases that were uncovered early on. The agency opened up a fraud investigating unit that very aggressively tracks and thoroughly investigates abuse and fraud reports and suspicions. To combat the fraud, the program initiated an electronic system that replaced the easily counterfeited vouchers with an electronically loaded debit style card that works just like ones from a bank. Now, fraud investigators can digitally trace transactions thought to be fraudulent in order to build fraud cases against the perpetrators. This could be an individual person that doesn’t report all of their monthly income in order to qualify for the benefits.

Understanding Food Stamps in New York

Sometimes, people in New York rely on the assistance of food stamps so that they can feed their families. Grocery stores and many other retailers that sell food that can be purchased with food stamps rely on the customers who have these benefits so that they can stay in business, especially in low-income areas. Most recipients and businesses see food stamps as a form of a cash payment, but the government sees the benefits as strictly for the purpose of purchasing food for the family instead of using the benefits to buy alcohol, toiletries, and tobacco.

Evolution from Vouchers to EBT Cards

Types of Food Stamp Fraud

The investigators can also catch retailers that allow snap participants to get cash for their SNAP dollar benefits. To do this, savvy retailers cook their books to make it look like the participant purchased food products. Other fraud concerns retailers that do not request the proper identification. Individuals that are not eligible to get snap benefits can then use or cash in the benefits from someone else’s card. Criminals often run scams where they apply for benefits using a dead person’s identity information or some other ruse. Another abuse of benefits involves retailers allowing snap benefits to be used when buying ineligible items like cigarettes, alcohol and even drugs.

Common Types of SNAP Fraud

Regulations Surrounding Food Stamp Benefits

There are regulations that states have to follow in order for people to receive food stamp benefits. The recipients of the benefits also have to follow strict regulations that include reporting any income changes, especially if the income amount increases, and reporting whether someone moves into or out of the home as these changes can impact the amount of the benefits received each month.

One of the ways that businesses can get in trouble is to treat food stamp benefits like cash, offering credit to recipients like they would if customers had a credit or debit card. This is called food stamp trafficking. It’s also classified as food stamp fraud.

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Participant Requirements

• Report any income changes, especially increases
• Report when someone moves into or out of the home
• Changes can impact monthly benefit amounts
• Use benefits only for eligible food items
• Do not exchange benefits for cash
• Do not allow others to use your EBT card

Compliance Rules for Retailers

There are many confusing rules that participants including retailers must follow to be in compliance. Store owners must train their clerks on which items can be bought with snap benefits, and which cannot. A juice might be on the eligible list, but another soda drink may not be. Some are easier than others to remember. The government doesn’t want needy individuals to waste more money purchasing foods prepared by a store and sold hot. However, they might be allowed to purchase some store made cold items.

Legal Scenario: What Would You Do?

Scenario

You own a small grocery store authorized to accept EBT cards, and a regular customer asks if you can swipe their SNAP benefits card for $400 but only give them $200 in cash, letting you keep the rest. You've seen other store owners in the neighborhood do this and wonder if it's really that serious since the customer is willing.

Can I really face federal charges just for giving a customer cash back on their EBT card instead of actual groceries?

Attorney's Answer

Absolutely — what you're describing is SNAP trafficking, which is a federal crime under 7 U.S.C. § 2024(b). Exchanging SNAP benefits for cash instead of eligible food items is considered fraud against the federal government, and penalties include fines up to $250,000 and imprisonment up to 20 years depending on the dollar amount involved. The USDA Office of Inspector General actively investigates these cases using undercover operations and electronic transaction monitoring to identify suspicious patterns at authorized retailers. Even a first offense can result in permanent disqualification from the SNAP retailer program and criminal prosecution, so you should refuse the customer's request and consult a federal defense attorney immediately if you've already engaged in similar transactions.

This is general information only. Contact us for advice specific to your situation.

Another ruse that unscrupulous retailers can use is to extend “credit” to customers, then taking the benefits when the card is loaded the next month. This is considered illegal. While a customer could do this with their own money, they can’t with government issued benefits intended for food purchases.

Eligible vs. Ineligible Items

What Retailers Must Do to Stay Compliant