ROLE OF LOSS PREVENTION

Over holidays, tourist seasons, and just in everyday shopping, fraudulent transactions occur more than most people realize. According to the recently released 17th Annual Retail Theft Survey, U.S. retailers lost more than $13.2 billion from employee theft and more than $29 billion total last year.

What is Loss Prevention?

The Loss Prevention Department was created to protect merchants and help control fraud in their day-to-day transactions. Merchants are vulnerable to consumer scams but also losses due to dishonest employees. Certain types of transactions will be red flags to the Loss Prevention team to alert the merchant of potential criminal activity.

Where Inventory Shrinkage Happens

Employee Theft 44.5%
Shoplifting 32.7%
Administrative Error 17.5%
Vendor Fraud 5.1%

As you can see by the statistics above, employee theft accounts for almost half of all loss. Part of this is directly related to credit card transactions. Merchants should be aware that their trusted employees could be committing crimes. There are many types of employee fraud, including:

Employees processing returns on their own card for merchandise bought by a customer
Employees processing a customer's credit card, saying it is declined when it is not, and then asking for another form of payment (usually cash which they keep for themselves)
Sharing/selling card information to criminals
Employees issuing credits to their own credit cards through the merchant's account, putting small amounts into their own bank account over a long period of time
Voiding transactions after a sale to put money in their pocket from the register or provide "free" goods/services to friends

An ACFE research study shows that fraud is not usually committed by career criminals but by longtime employees who are high on the company's organizational chart. These employees have greater access to company funds and information, and tend to be more trusted or above suspicion than those lower in the ranks.

How Can I Protect Myself From Employee Fraud?

Merchants don't have to be paranoid that their employees are stealing from them, but should be aware of the risks to protect their businesses nonetheless. To help avoid internal fraud, merchants can:

Distribute responsibilities among employees so that different employees collect receipts and make out deposit slips
Review bank statements and write checks yourself
Periodically open your own mail and compare payments received with deposits
Hire an outside accountant to audit your books
Require two signatures on checks over a certain amount
Review billing error complaints from customers and require that original invoices be kept in the files

Consumer Fraud

In addition to internal fraud by employees, merchants should also be aware of consumer fraud. Although it is not as high on the list, it is easier to detect and the Loss Prevention team can help. For instance, if a customer came into a store and attempted to make a very large purchase (the largest the merchant had seen to date), the Loss Prevention team would flag the transaction and contact the merchant. It could just be that the merchant had a larger-than-normal purchase by a non-fraudulent customer, but it could also be that customer was trying to use a stolen credit card, or was attempting one of many other scams. To avoid having your bank account suspended, merchants must also be aware of their high ticket limit (V/MC) and not process transactions over that amount. If there is a determined customer wanting to process a large transaction over the limit, inform them that they can use a debit card, American Express, or Discover. As EMG does not monitor the limits for those types of transactions, our Loss Prevention team will not flag a merchant's bank account for an over-the-limit transaction. If there is a transaction close to the limit, merchants should call our Loss Prevention team at 800-789-8897 (option #4) to inform them of the transaction.

The goal of the Loss Prevention team is to help merchants reduce these risks and keep losses due to fraud to a minimum. For more information click here for fraud prevention tips.