5 Types of Retail Fraud and Ways to Combat Them

Fraud is a persistent problem in retail stores, independent of size or location. It can easily wipe out their profits and inflict significant losses. Retail fraud is evolving substantially. It occurs in staggering numbers, and retail stores are struggling to keep pace.

As retail fraud is becoming more sophisticated, it needs to be countered with effective methods. The state of Michigan classifies retail fraud into three degrees. Each degree of retail fraud charges is defined by the property value involved.

First-degree retail fraud is a felony charge and can result in a jail sentence for up to five years and fines of up to $5,000 if convicted.

Second-degree retail fraud is a misdemeanor charge and can result in a jail sentence of up to one year if convicted, along with fines of up to $2,000. 

Third-degree retail fraud is a typical charge for shoplifting small items under $200 in value. If convicted, the criminal is subjected to 93 days of jail time, in addition to fines.

Here is a list of the five most elusive types of retail fraud:

1. Unauthorized Manager PIN Usage

In many retail stores, a supervisor manages the store and enters a personal identification number (PIN) to unlock activities that are vulnerable to various types of fraud. However, this PIN can be revealed to others because of its extensive usage. Since it can be used for multiple operations, it is not possible to confirm the authorized use.

2. Sliding

A cashier may scan the product while obstructing or covering the barcode. This occurs during sliding. It allows the customer to skip the payment of the concerned item. 

3. Loyalty Fraud

Retail stores allow their customers to earn loyalty points by entering their phone numbers at checkout. The cashier can exploit this particular service by entering their phone number to earn the customer’s loyalty points. 

4. E-commerce Customer Service Fraud

There are times when an item in transit does not reach the customer. The e-commerce industry replaces the lost package for free and sends additional gift products as “customer satisfaction funds.” 

5. Price Switching and Sweethearting

This type of fraud occurs in departments that sell items by weight or quantity. It is a type of organized retail crime (ORC). Sweethearting is a form of theft performed by employees at the cash register; the employees give away merchandise to a “sweetheart” customer. In price switching, the price tags, which are printed on-site, are replaced by employees.

How to Combat Retail Fraud

· Know Your Customers

Retailers can make use of identification software to detect a customer’s intention. It looks into the customer’s data to identify any previous incidences of retail fraud. You can also look at the criminal records of the customer you are suspicious of. You can again run a search of their neighborhood or their relations to unearth unique links.

· Verify at the Point of Sale (POS)

For a retailer, the point of sale is the first line of defense. Integrating an address verification service (AVS) within the payment service ensures that the credit card information matches the user’s billing address. 

· Follow Through on Suspicions

Robust security protocols in your e-commerce platform will help you to identify suspicious IP addresses. If the retailer discovers any discrepancies, it should automatically trigger identification verification procedures. 

· Make Recordkeeping a Priority

An extensive recordkeeping procedure that includes the compilation of receipts and robust maintenance of customer purchase histories will help retailers stay ahead of fraudsters.

To Conclude

Different fraud types are significantly pervading retail stores. To intercept the fraudulent attempts, the retailers need to identify the nature of the fraud. Retailers can also search on the potential fraudster’s associates, locations, and past histories to prevent future fraud attempts.

Author Bio
Chetan Sharma is a blogger and digital marketer by profession. He handles a network of multiple websites like biovision blog & spandanam blog various others. He helps clients all over the world to achieve digital success.

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