• Val Ryan

State Governments and Retailers Work Together To Address The National Opioid Crisis

Retail crime and gift card fraud has been linked to the opioid crisis as a funding mechanism for addiction across the country. (CNBC News Article) Gift cards, a financial type of instrument widely used and highly liquid, are used extensively for criminal activities involving drugs and money laundering.



Legislation breaks new ground. Tennessee's Retail Crime Prevention Act effective July 1, 2018, is unlike any other crime law in the country. Existing laws in other states focus exclusively on increased penalties and greater fines resulting in slow and expensive reactive results. The new, innovative law in Tennessee concentrates on proactive results and immediate changes for Tennessee communities - specifically, reduced opioid addiction, recovered sales tax revenue and safer retail stores.

Because of the Retail Crime Prevention Act, retailers, for the first time, can view real time data identifying gift cards that might be linked to drug activity, money laundering, and retail crime. Retailers will now have the necessary information to be certain which cards aren't involved with criminal activity while instantly suspending gift cards associated with fraud. Simply by sharing information, retail stores and the government will both benefit. Retail stores can instantly recover the cost of stolen merchandise and immediately restore stolen sales taxes to the State of Tennessee, all while stopping money from being used for the opioid addictions of criminals.

For retailers, the view of the data is similar to the linked analysis boards you see on detective shows. However, instead of highlighting individuals with a flat, two-dimensional view, this three-dimensional perspective links dates, places, and businesses where gift cards are being resold. Because of the repetitive nature of criminal activities, addressing the largest issues first makes a significant difference to future illicit acts.

The extent of this criminal activity can be understood by examining a 2017 case in Oklahoma City. Over a two-year investigation, law enforcement documented more than nine million dollars ($9,000,000) in merchandise stolen by organized criminal rings. The stolen merchandise was returned in exchange for gift cards that became the financial instrument to launder money and fund drug addiction in the city. Ultimately, these gift cards were sold online through unsuspecting websites to consumers. Due to the investigation, one of these websites, Gift Card Zen, has recently stopped buying gift cards from suspect stores, recognizing the risk of being associated with entities that can be rife with fraud.

The specifics of the Oklahoma City Gift Card Fraud case were astounding as 20,000 syringes were recovered from a small, grim store front in Oklahoma City. The operation was estimated to have cost retailers twenty million dollars ($20,000,000) in gift card fraud, while flooding the streets of Oklahoma City with drugs valued at more than seven million ($7,000,000). In addition, the sales tax revenue lost is estimated to be seven hundred fifty thousand dollars ($750,000) for the city and more than nine hundred thousand dollars ($900,000) for the State of Oklahoma.

The reality is that this is not an isolated case. Similarly, sophisticated criminal enterprises have been identified across the US in states including Florida, Colorado and New Jersey. The National Retail Federation's Annual Retail Crime Survey, in conjunction with Appriss, estimates retailers lost $17.6 billion in 2017, while state governments lost an astounding $1billion ($1,074,434,971) in sales tax revenue, the majority flowing into criminal activities. In Tennessee alone, it is estimated that the state lost more than 15 million dollars ($15,000.000) in stolen sales tax dollars.

Because of one Knox County sheriff deputy, the situation will change in Tennessee. This single public servant connected the dots between opioid addicts and the resale of gift cards as he investigated retail fraud cases around Knoxville, Tennessee. After extensive research, he presented his observations to his state elected officials and proposed a change in state law. State Representative Jason Zachary and Senator Richard Briggs sponsored his legislation and convinced their colleagues that tackling the opioid crisis would require addressing the funding of the addiction. Despite the efforts to defeat the proposal by high dollar lobbyists hired by big corporations, the legislators secured support from the Tennessee Retail Federation, the Chiefs of Police Association, the Sheriffs Association, and the District Attorney Conference. After two years of negotiations, the legislation passed and was signed by Governor Haslam on April 28, 2018.



Presently, the legislation is being implemented across Tennessee with assistance from multiple state agencies ranging from the Comptroller, the Department of Health, and the Revenue Department, all capturing data to measure the impact of the law over the coming year. The first step is underway as individual jurisdictions within Tennessee are notifying the resale website companies located in New Jersey, Chicago, and San Francisco of the compliance requirements established by the law to legally do business in the State. It is expected this new law will not only restore state sales tax dollars but also address the current opioid crisis within Tennessee by disrupting addicts funding.

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