"We're talking massive amounts of money being spent," said acting detective senior sergeant Iain Chapman.
"People are going into Countdown supermarkets and buying $500,000 worth of iTunes cards. We had one purchase of $1m at a Harvey Norman. A person went in with a suitcase full of cash."
Chapman said New Zealanders were buying the cards, photographing the bar codes and selling them to people in China for a massive profit.
The Chinese would modify their computers to "trick" them into being compatible with New Zealand iTunes. Australian iTunes cards were also being used in the same way.
Chapman said police would need a complaint from iTunes in China before they acted.
But transactions would be monitored to make sure money laundering was not involved, he said.
The retailers involved were co-operating by reporting any unusually large iTunes purchases.
"We have spoken to a number of them [buyers] but without evidence of a significant crime there isn't anything we can prosecute for."
However, police were also assessing complaints about blackmail scammers starting to use iTunes cards as currency. They have received complaints about cyber blackmailers demanding up to $10,000 in iTunes cards as payment.
Chapman said cyber criminals made contact through WeChat or other social media sites offering prostitution or a "quick liaison".
The scammer waited until the victim revealed personal or intimate details, a Facebook profile or sent revealing photographs and used the information as leverage.
They threatened to upload the photographs and details of the exchange on social media unless thousands of dollars worth of iTunes cards were bought and the codes photographed and sent.
Tracking and prosecuting international scammers - who are fleecing gullible Kiwis of an estimated $400 million a year - has become increasingly difficult.
Chapman, who heads the Auckland City Financial Crime Unit, said a new focus was on identifying local "mules" who transfer scammed money into offshore accounts.
Exact figures of how much is scammed from Kiwis every year are not available because no central agency collates the amount and many embarrassed victims don't report their loss.
But the Ministry of Consumer Affairs estimates $400m disappears, mostly overseas, every year into the pockets of scammers.
Bronwyn Groot, security and fraud co-ordinator for the BNZ, said romance scams were hitting people hard. Losses of $50,000 to $250,000 were common.
Inheritance scams were still prevalent and some people lost more than $200,000.
Netsafe expects $10.5m of internet scams to be reported to the organisation this year, up $2.5m from last year.
iTunes in New Zealand and Australia declined to comment.
