Steps Needed Now To Limit Retailer Trafficking
Most of us have heard of the dreaded “drug trafficking” and “human trafficking,” but there is also another type of trafficking out there that is way out of hand. It’s called “retailer trafficking,” and it’s resulting in a billion dollars worth of fraud annually in the federal Supplemental Nutrition Assistance Program (SNAP), formerly known as the food stamp program.
The Government Accountability Office (GAO) issued a report this week evaluating the damages caused by retailer trafficking, in which a retailer defrauds the program by "selling" cash instead of food. For example, a store might give a person $50 in exchange for $100 in benefits, then pocket the difference. The Food and Nutrition Service (FNS) reports that $1 billion in benefits are trafficked annually. However, the real extent is uncertain and could be anywhere from $960 million to $4.7 billion annually.
GAO noted that FNS has already evaluated some ways to improve how it measures and addresses retailer trafficking. However, GAO explained that FNS has missed some opportunities to strengthen these areas. For example, since FNS has not taken steps to clarify and improve its retailer trafficking estimates, questions remain regarding the accuracy of the estimates and the extent of fraud in SNAP. In addition, prevention and early detection of retailer trafficking are particularly important and deserve continued attention, GAO explained, especially since retailers can quickly ramp up the amount they redeem in federal SNAP benefits, potentially by trafficking. However, because FNS reauthorizes all stores participating in the SNAP program once every five years, GAO contended that the agency may be missing an opportunity to prevent trafficking through more frequent oversight of risky stores.
To highlight these concerns, FNS officials stated that in fiscal year (FY) 2017, the agency imposed sanctions (e.g., fines or temporary disqualifications) on 862 stores found to be violating program rules, and disqualified permanently 1,661 stores for trafficking SNAP benefits or falsifying an application. This is a 26 percent increase in the number of stores sanctioned compared to FY 2013. Still, GAO recommended that FNS assess the benefits and costs of reauthorizing a sample of high-risk stores more frequently than other stores, use the assessment to determine the appropriate scope and time frames for reauthorizing high-risk stores moving forward, and document this decision in policy and on its website.
GAO also recommended that FNS improve its retailer trafficking estimates, increase the penalties for retailer trafficking and establish performance measures for its trafficking prevention activities. FNS generally agreed with these recommendations, and frankly, so do we. Retailer trafficking is a huge problem and steps need to be taken to address its frequency and limit the costs lost to fraud. Hopefully this report will spur greater attention to solving this issue.
