2. ROLE OF LOSS PREVENTION

The holiday shopping season is here, and with it comes the height of retailers' concerns over shoplifting and employee theft. 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. Employees can process returns on their own card for merchandise bought by a customer; run a customer’s credit card, say it is declined when it is not, and then ask for another form of payment, usually cash (which they keep for themselves); or share/sell card information to criminals. Employees may also be issuing credits to their own credit cards through the merchant’s account, putting small amounts into their own bank account, or even voiding transactions after a sale to put money in their pocket from the register or to 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 collects receipts and makes out deposit slips
Review bank statements and write check themselves
Periodically open their own mail and compare payments received with deposits
Hire an outside accountant to audit their 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

Another thing merchants try to avoid is 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 the largest purchase 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. To avoid having a 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 pushy customer that is determined to process 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 the merchant’s bank account for an over-the-limit transaction. If there is a transaction close to the merchant’s limit, they 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 at a minimum. For more information about fraud, please visit Visa’s website at http://www.visa.com, and click on Operations and Risk Management.