Retail Fraud Advice

Fraud during business ownership transfer or sale.

2011-09-22T06:00:00.000+01:00

This case is interesting of a company director taking cheques from suppliers for the business, after he had already sold the business. A fraud of £42k.

He admitted it saying that he did it to get money out of the firm before he sold it.
Read More

The director of former good character co-operated with police and got a suspended sentence. Sellers remorse for not achieving a big enough price perhaps?

The change of business ownership presents many challenges and opportunities for fraud. Partly this is due to a resilence on dealing with the same people day after day.

People tend to follow the same process habitually, change needs to be planned, communicated, implemented and reviewed.

The Big Society - Are Charities better keepers of public funds?

2011-09-19T06:00:00.000+01:00

The Big Society - Are Charities better keepers of public funds?

Photo Flickr

This is a sad story from Wales Online, of a great organisation, a Citizens Advice Bureau that helps its local community, that was a victim of fraud to the tune of £575k by a couple of its employees.

The fraud was a mixture of, overpayment of salary combinded with false invoices for services that were not delivered.

While its good to see that £163k is to be recovered from the sale of their assets, it seems that part of the problem that the CAB "became “awash with cash” after the couple won a contract from the Legal Services Commission to run a Wales-wide call centre. Between 2002 and 2006 it brought in £1.2m, not including grants from the National Assembly plus the county and community council.

It must be truly galling for volunteers of that organisation, who dedicate thier time voluntarily to help their community with problems, including debt problems, to know colleagues were living the highlife.

In addition for the public funds to be abused, I am sure those services were not replaced.

He said they “squandered public money on champagne, expensive meals and holidays” adding their behaviour was brazen and startling.”

Read More http://www.walesonline.co.uk/news/wales-news/2011/04/12/fraud-pair-to-pay-cab-163-000-91466-28501438/2/#ixzz1Y7Sevi1X

As the Big Society, we want more charities and voluntary organisations to run projects and services with public funds on our behalf, this case begs the question, how these organisations ensure these funds are not used fraudulently?

Fraud in Disabled Driving and Parking

2011-09-13T06:00:00.000+01:00

As I often ask, don't fraudsters have any morals and the answer is of course, No!

One fraud that is dispicable, is fraudulent use of disabled parking.

Disabled drivers get a "blue badge" in the UK to allow them to park in disabled spaces and in some cases on single yellow lines. For genuine users this of course very important and a big part of their freedom and independence and there are 2.5m of them in the UK.

Of course for other drivers, driving is both frustrating and expensive. So anything that means not queuing for spaces or paying for spaces is attractive. This article says this fraud costs £46million per year. Again as usual fraud costs are not broken down, but it seems that it is relating to investigation and prosecution costs.

The blue-badge scheme is for review and it seems its required. Too easy to create fraudlent badges. In the age of ANPR everywhere from high-streets to petrol stations, a piece of cardboard doesn't cut it anymore.

Timebandits - Retail Employees steal time.

2011-09-07T06:00:00.000+01:00

Creative Commons on Flickr

Timebandits - Retail Employees who steal your time.

Another theft that needs to managed is that of time. Employees are there to do a job and complete their assigned tasks.

Time-theft may occur through friends clocking them in, using time to check social network sites or abusing smoking or lunch breaks.

There is a good summary of retail loss prevention technology here. Ultimately in retail time-theft leads to customer dissatisfaction in one form or the other.

Like most of fraud prevention, a lot of it is down to clear simple processes, staff awareness of expectations and measures that are recorded and reviewed. Some standard measures are here. Ensure your EPOS system collects data to be able to calculate Sales Per Employee and Average Sales per Transaction.

Nobody is effective 100% of the time but to avoid this fraud you may want to set standards based on your best staff which will highlight underperforming staff.

You should also also record positive behaviour such as up-selling items, like for example mobile phone top-ups, and negative behaiviour such as receiving complaints.

From a fraud perspective Refunds and Gift Voucher Sales per employee should also be measured.

See also losing your billable time.

If fraudsters are so clever how come they always blow the cash and never invest money they steal?

2011-09-04T22:00:00.000+01:00

Photo from Images of Money on Flickr

If fraudsters are so clever, how come they always blow the cash and never invest money they steal?

Sad story here of a employee who stole £168k from her employer. She used most of the money on a dream wedding and a jewel encrusted ipod cover.

As if to rub it in, she invited her employer to the wedding, at which he became suspicious as it was so lavish, beyond her visible earning potential.

It must be so annoying to victims of fraud, that fraudsters never actually invest the money into homes or cars so that some value that could be recovered. Blowing it all on the high life leaves nothing for the vicitims.

I guess if they were that smart a) they wouldn't do it in the first place and b) they wouldn't get caught.

When fraudsters are welcomed back by employers. Do people ever only commit one fraud?

2011-09-01T23:30:00.000+01:00

Interesting story here on a Naval Officer who was jailed for a fraud which involved claiming school fees for children he was no longer the primary carer for.

The sum involved is not inconsiderable £53k. This could be seen as a 'technical' fraud, had he still been married to his wife he would have been entitled to make this claim. The fact they seperated meant that entitlement was no longer valid.

What really intrigues me though is that even after a jail sentence his employers are open to him returning to his post.

Rear Admiral Simon Lister, director of submarines, said he would support Gray remaining in the service.
In a letter read to the court, he said: "Such an outcome would have my unswerving and full support."
I am sure that is an unusual situation, and perhaps even justified in this case.

It does beg the question though, do people ever only commit one fraud? Or even more specific, do people only ever commit one fraud if they are caught and never commit any more?

Perhaps being caught once is enough to ensure a person never does it again. We all make mistakes.

Whats your view?

Even fraudsters want a good time on holiday!

2011-08-25T06:37:00.009+01:00

A good story here to show that fraudsters may not always be defrauding you of stuff to re-sell, sometimes they just want a good time on holiday, at your expense!

The eight Russians, who claimed to be the offspring of wealthy oligarchs, ploughed their way through around 90 bottles of Cristal Champagne worth 86,000 euros at Billionaire, a nightclub owned by the former Formula One impresario Flavio Briatore.

A £75,000 bar bill is quite something. Thats the problem with fraudsters, they often look like your best customers, except of course they may not even drink the champagne they order, but why worry, they are not paying!

p.s They also don't care about high delivery charges, because they are not really paying!

Its also interesting that the victim was allegedly reluctant to bring in the police for fear of damage to their brand. Fraudsters really love that reluctance, its what lets them repeat fraud at the next port!

A fraud that hurts Writers and other Professionals - losing your billable time.

2011-08-24T06:57:00.011+01:00

Dick Preston, radio, film-maker 1951
Creative Commons on Flickr

One fraud that hurts those, that like me, are self-employed, selling their skills to pay their bills, is that of fraud that costs you, not money, but your time. Your time that you could have used on something that would have paid and not something that will never pay. You only have so many hours per week that you can use to bill, losing them is hard to replace.

This site is a good summary of fraud that affect writers. Be it fake writing contests (where you pay extra fees to be published as a "winner", fake essay writing sites where you never get paid, Agents where the fees keep on coming, or those that appeal to the writer's ego to be self-published that charge for services with always additional fees, or for access to editors, manuscript evaluation services or agents who are "in the know" or with "access to the right people" to get your book published, but it never will.

Additionally there are many editors who commission works for publications, that may be published but where any royalties are never forthcoming.

So if time is money for you, be as careful of how you spend your time, as how you spend your money and don't be afraid to talk about money up front, later never happens.

Fraud in Sports

2011-08-22T08:00:00.002+01:00

Perphaps it would be nice if sport above all was free from fraud. But sadly that is not the case. Lessons here from alleged good old fashioned cheque book fraud, the alleged fraudster is accused of trying to scam three different golf clubs. Why golf clubs, well my guess would be that the items are valuable and easy to sell on the second hand market. If proven true it it shows that nothing fraudsters like more than a pattern. This pattern worked, then their basic instinct is to repeat it again and again until it stops working, or they are stopped.

Another fraud that sports are vulnerable to is a call from an agent representing a foreign player. They may be mis-representing a genuine sports agent and promising delivery of sport performance way above what the club would be used to. The problem comes of course when the club are asked to provide visa and insurance payments up-front via Western Union or other person to person transfers.

Finally if you ever wondered why a glass pint symbol appears when you watch SkySports in the pub, its there as an anti-fraud device, to show that the premises is a legitimate Sky commercial subscriber and not just paying for a personal fee and then making money by showing it in a public premises.

Any opportunity for fraud! - Parking Fraud Hardly Worthwhile?

2011-08-17T08:57:00.000+01:00

Very interesting story here about London Estate Agents who used flats they were selling, to get resident car permits to which they were not entitled, in order that they could save thousands of pounds in parking charges.

The report says:

Westminster Council estimates the scam saved the estate agency around £10,000 a year.

It shows anything with value, be it a good or a service can be a target for fraud, even at first glance it would not be something you would normally think of. Part of the reasoning has to be the value to fraudster, in central London this is a lot of money, making the fraud worthwhile, until they were caught, a pretty bad impact for a business trying to trade in the area.

Quite a business plan that has to pay over £10k p.a. on parking though!

London riots, time to reboot the relationship between Retailers and the Police?

2011-08-11T09:38:00.000+01:00

After the Riots - A new relationship between retailers and the police?

Debate here.

Looking at the aftermath of the London riots and a particularly bad week for Retailers I wonder if its time to reboot the relationship between Retailers and the Police?

As dramatic as the pictures were, of the entire contents of a shop being looted, the truth is that retail theft is a problem every day.

What the riots did was present the problem in a 24 hour news media friendly way. I mean when was the last time any 24 news channel reported on theft from retail?

I am sure many shopkeepers are thankful for police actions over the last few days.

Everyday theft happens from retailers and they complain that the police are not interested in dealing with these problems or protecting them.

So perhaps now its time to review what does retail want from the police?

Retailers have some responsibility to protect their stock to lock the door, provide CCTV etc. I guess the question is where the balance should lie, should retailers really expect theft of a 10p sweet to have a police response?

The answer for some is that not dealing with the 10p theft means it is bound to escalate to larger theft. Retailers pay a lot of local and national tax and are entitled to a level of protection.

For some the answer is its just an insurance claim. But did you know, that in the case of a riot (which has a strict definition), see story from the BBC here that if insured the insurance pays the shopkeeper then the insurance company can claim the money back from the Police Authority under a law from the 1800's! Who pays the Police Authority -> ordinary taxpayers and businesses. Potentially meaning less police on the streets.

In the case of a retailer who is not insured again they can claim from the Police Authority (but again only in the case of a riot)! The act is strict there are only 7 days to claim so if affected contact your lawyer today.

I would be really interested to hear your views and what you think the balance should be?

The personal fraudsters job description - Find your buttons and push them!

2011-08-08T09:27:00.000+01:00

In terms of people who defraud others on a one to one basis, I was thinking how you would describe their "job"? And what I came up with it was to:

Find your buttons and push them!

Push them to achieve the desired emotional response and related behaviour.

I often see victims of fraud as being protrayed as lacking intelligence but really it's not to do with intellectual intelligence but rather emotional intelligence.

Every human has wants, needs and desires. The fraudster just needs to figure out which buttons will work for each potential victim!

Remember we all have buttons to push and times when our defences are low, no-one is immune!

Here is a word cloud of some states that may leave us open.

Free Trials - Giving Refunds Versus Enforcing Payments - the best approach?

2011-08-02T08:00:00.008+01:00

Here is an interesting discussion about chargebacks for Linkedin premium subscription.

The problem with the card subscriptions for consumers, as in this case, is that often after they have signed up for a free-trail with a credit card, then they forget that they now qualify for the paid service your website is offering, and the yearly subscription payment is processed.

I recently had a similar issue with Amazon Prime service, I had subscribed but not added a valid card so the subscription had never activated. When I added a card later to make a purchase, and the prime renewal was due, the prime subscription kicked in.

In this case Amazon cancelled the subscription and refunded the amount in two days, although they were clear that this was because I had not used it for any delivery (fair enough I think).

So though I accepted it was my fault, Amazon retain me as a customer as I felt that I was treated fairly even though I made a mistake.

How your customers feel will be a big part of your decision making process. If you have not really suffered any financial loss then its probably better to do the refund even if you are in your rights not to.

The reasons to provide the refund include:

Not having disgruntled customers in your community and distracting from your main focus
Avoiding customer calls and emails and dealing with complaints
Avoiding yoursite-sucks.com results in internet searches
The chance of selling customers something else in the future.
Avoiding a high chargeback rate that may give your business higher fees or make it harder to get a processor

Consider your ability to process refunds, if you are going to do it, make it clear to your customer when you will do so and make sure you meet this promise If you are not going to process the refund then make sure your acquiring bank will accept what you provide as proof of delivery, to challenge the chargeback.

Fraud the overriding emotion of victims is FRUSTRATION!

2011-07-29T09:54:00.000+01:00

If there is one emotion that fraud victims speak of more than any other, then it has to be FRUSTRATION!.

This is not something that any of us want to deal with.

Frustration comes from recollecting points at which it could have been avoided, incorrect decisions, the feeling of why me and quite often, the lack of help or interest from the relevant authorities.

So get frustrated, but find a way of letting it out of your system. Afterall 99% of your customers love your business and are trustworthy and honest. Don't let the fraudsters destroy your view of the world.

Life is full of opportunity. Think about security and fraud prevention a couple of times a day, but don't let it get in the way of running your business.

Don't assume - ask and check identity

2011-07-28T08:54:00.000+01:00

Do you make assumptions about suppliers and visitors to your shop?

I like this story:

My favourite/most annoying thing caught on camera was two men in high vis jackets wheeling a full 12ft flower display from directly in front of the Retail Unit, out of the building (service station) and into their van while two Retail staff chatted 3 foot away. What made it worse was that one of the cleaners even picked up a couple of missed flowers and took them to the guys who were loading it all on their van. If only YouTube had been around then, it would have been a massive hit !

It shows that people tend to trust others in uniform, as above the fact that they were were high-visibilty jackets there was an assumption on retail staffs behalf that the thieves must have been from HeadOffice/Merchandiser or some other genuine reason to be there.

Two simple counter-steps:

All visitors should sign-in in an book
All visitors/suppliers should be expected to be asked for and to provide ID

Bad guys acting as your best customer

2011-07-27T08:57:00.016+01:00

The new CIFAS report shows fraud increase of 10%. It shows massive growth in identity fraud.

As a retailer this highlights that there is nothing a fraudster likes more than gaining access to your best and most trusted customers profile.

They may do this off site, through email or through your site and then use the customers or another card. The problem for you as a retailer is that you are likely to pass the fraudulent order through your fraud process unless you have picked up the account changes.

As a ecommerce retailer you should monitor changes in passwords, addresses and card details.

If these change then you should rescore customers, even if they have good order history with you, as this may be an account takeover about to cost you a lot of money.

Of course your genuine customers will also do all of these things without any bad intentions to your business.

Google to issue credit card for business

2011-07-25T06:51:00.001+01:00

Here we see Google is to issue a credit card. Given the lack of trust with the financial sector, it begs the question, do you trust Google more than you trust your bank?

Lessons from BA £250k internal staff fraud loss

2011-07-22T10:31:00.003+01:00

See here for BA story on a British Airways £250k loss.

Although I have not been involved in this case, from the reports the following things strike me as lessons in these allegations that might apply to other cases:

1. Audits work, and for that matter so do double-checks, stock-checks and other second person checks.

2. The "Whistleblower" may or may not be innocent, after-all, they know about the problem for one of two reasons, one they were an innocent bystander
who witnessed wrong-doing and reported it at the earliest opportunity, or they knew of the fraud because they were involved in it, knew it was about to be discovered and therefore blew the whistle to protect themselves and implicate other people.

3. A second person involved in the process is not bullet proof, many other people would be much better, after-all you may bribe one member of the team but not many.

4. No matter how good your selection process, there's always one and they won't stop until you stop them.

5. Therefore don't set your processes in stone, changing roles, responsibilities, processes, systems every so often can shake out problems

6. There is no foolproof fraud rule, although the same card and same email address was used to buy many tickets, I am sure that for an airline they would have some corporate cards that are used to buy airline tickets every single day.

7. Employees should have no defence that they were not aware of their responsibilities or company policies.

Pricing as a Fraud or Theft prevention tool

2011-07-21T08:00:00.011+01:00

Good idea here about using pricing as a fraud or theft prevention tool for retailers in a face-to-face trading environment also below.

One of the easiest fiddles to stop is a simple pricing issue, Weatherspoons have there prices end in 2,3,4, 6,7,8 to make sure each sale has to have change, if you sell a drink at 2.50 don't be surprised if the cashier when asked for two, then given a fiver does not bother to ring it into the till. Customer is happy, tills all balance, is just the stock and the profit that is missing.You should encourage customers to expect a receipt, even though this can be annoying at times it will save you money.

This incorporates two ideas, one to use pricing as a mechanism to ensure that change is always due. So for example if total amount is going to be £$5, £$10 then the customer will not be expecting change and therefore will walk away. This allows the cashier to not even ring up the amount or ring it up and void the transaction, in both cases the cash drawer does not open and the cashier can pocket the money. Generating change, customers will even wait for 1p/c ensures the transaction is rung through the system.

Some retailers, such as charity shops use pricing to distinguish product types, e.g. donated product versus bought in goods.

In addition it encourages customers to expect a receipt, which will only be generated if the transaction is completed on the point of sale kit.

Some retailers even go as far as to offer a reward to the customer if they do not get a receipt. It enforces the policy of receipt giving and also when customers come back without a receipt you can re-iterate your refund policy that a receipt is given and therefore required for refunds. Refunds recalled on a POS systems from the original receipt restrict the opportunity for staff fraud when handling refunds.

Do you enforce such policies?

Staff Discount Fraud Risks for Retailers

2011-07-20T08:00:00.006+01:00

Happy Staff!

Staff discount can have a number of benefits for retailers;

Motivated staff
Staff wear/use products in the shop locality
Staff use and understand the products better

However staff discount is also open to abuse. If the discount is so large it may allow staff to treat your business as a wholesaler and buy from your and sell on to friends, on ebay or at car boot sales and therefore deny you sales at full price. Afterall you don't want to compete for sales with your staff!

If the discount is solely for your staff then you need to ensure that this is checked.

Some Anti-Fraud steps to consider:

Define limits and terms and ensure staff are aware of them
Ensure you have systems/reports/processes to monitor use
Tell staff the value of the benefit, so they also know that its monitored and therefore prevent abuse
Consider a second check on staff transactions, for example any member of staff can sell to any member of staff, but they are required to get a manager signature on the receipt and present to security guard before removing any goods from the shop.

Fraud in Service Retail - I'll taka pizza that cash! - Voiding Transactions

2011-07-19T08:55:00.000+01:00

Another good story here:

When I worked for Dominos as a delivery driver many moons ago there was another driver there sacked for taking deliveries, taking the money off the customer and then marking the order as void on the system when she got back to store.

She was caught as each manager had their own password, and the password she was using one night belonged to a manager who was on holiday that week. Stood out like a sore thumb on the end of day!

Whoops!

Another area open to fraud is voiding transactions, most systems allow it for the circumstances where a customer starts and order but then changes their minds. Voids should be monitored daily. In this case they were used to negate actual sales, of course at the end of the day, no money would be missing from the till in these circumstances as the EPOS system would not expect to have payments for voided transactions. In addition if you want to restrict voids to manager only, you need to ensure that they don't share passwords.

What people steal? Goods or cash!

2011-07-18T16:00:00.002+01:00

Some good stories here from retailer loss experiences.

It boils down to the major risk for retailers - goods or cash (including electronic cash).

If you don't have an idea where to start with fraud prevention, then this is a good place, the two key risks to your business are goods and cash.

For both of them, to quickly look at the risks to these in your business, then look at the processes on how both of these, come in to your business and how they go out of your business.

Like the story below, the returns process in the shop allowed a member of staff to send the goods to their own address. Look at each process where goods go out of your business and see if it opens an opportunity for staff to exploit a weakness. What would prevent such a scam in your retail business today?

"Don't need any advice as I no longer have a shop but just thought I would relate one of my favourite staff swindles that went on in a store that I once worked in.

I worked for ASDA on Non Foods , well over 30 years ago .
You can judge how long ago because not only did the store close on Sundays but we were also closed to the public on a Monday too !
Seems incredible now !

Monday was used for price changing ( peeling off old tickets and re-pricing each item ! ) and re-merchandising the shelves .

On the clothing section , Monday was also spent returning faulty goods to manufacturers and one of the supervisors would parcel up clothes and trot over to the Post Office to send them back .

Another member of staff realised that a suit that she had seen hanging up on a rail in the morning wasn't there on the Monday afternoon , so an investigation began as there were no members of the public to blame for the disappearance .

Turns out that the supervisor responsible for faulty returns was taking garments that she fancied off the shelf , parceled them up , wrote her own name on the parcel and Royal Mail delivered them to her home address .
Absolutely brilliant ! Not only did ASDA provide her clothes for free , they also paid the postage !!"

People are an important retail fraud protection tool!

2011-07-18T09:41:00.001+01:00

As this story shows, people are an important fraud protection tool for retailers.

You should not under-estimate the power of motivated staff to stop or report fraudulent actvity.

In order for this to work you should consider these:

1. Do your staff have a confidential way to report potentially fraudulent activity such as an outside whistleblowing hotline like Expolink? You may fall back on the old line that they should report it to their line-manager, however you should consider that collusion is often found in retail fraud and that the line manager may be in collusion with the activity and therefore take action to protect their position. Which may give your business the double-whammy of suffering fraud and then firing honest staff who tried to prevent it! This is one area where lines outside of the business makes sense.

2. It is probably not appropriate to offer rewards for this activity, afterall you don't want to incentivize mis-reporting against unlike bosses, however it is still important to acknowledge how difficult it is for someone to report a colleague for potentially fraudlent activity. If they get it wrong they are possibly putting their own job at risk, so low-impact recognitation is appropriate. For some wider discussions on rewarding whistleblowing see here.
What do you think, how would you reward a whistleblower? Afterall its probably easy to define the loss and therefore the predicted loss if you were not made aware of it. If for example someone generated an extra £2000 income, you would probably reward them, so why not if its preventing a loss?

Refunds - The lowest barrier of entry to Fraudsters?

2011-07-15T10:02:00.000+01:00

As shown here in this report from Liverpool, , where a "trusted" member of staff abused the trust placed in them. Refunds offer a pertty low barrier of entry to shop staff to dishonest activity.

Refunds offer a "quick fix" to a too large of a credit card bill, your employer can just pay for it!

Of course as shown here its a kind of fraud that leaves a trail.

Good basic practise such as bank reconciliation will capture or prevent this.

But isn't this a bank problem?

Sadly no, your acquiring bank will not take responsibility.

As with many things there is a balance between customer service, i.e. always being able to give genune customers refunds and security, i.e. controlling who has the ability to do refunds.

If you shop has an card terminal interfaced to your EPOS system then refunds should be driven off recipts and previous purchases, reducing scope for fraud. If you use a bank or other stand-alone terminal then its openess leads to many opportunites for abuse, therefore your daily bank reconcilation and report checking is key to mitigating this risk to the bottom line of your business.

Retail Fraud Advice

2011-07-14T16:24:00.000+01:00

Hi,

Welcome to Retail Fraud Advice blog.

This is a blog about anti-Fraud, software, services, people, processes and training that retail businesses can use to prevent losses due to fraudulent activities of customers or staff.

I want to speak to many people in the retail fraud industry.

If you have a burning issue and want some free advice on any retail fraud issue, then I am happy to speak to you for an hour.

I hope this helps and let me know how I can help