Five Forms of Employee Fraud to Be Aware Of
Before evaluating solutions, retailers need to understand the types of fraud they’re facing.
Many forms of employee fraud involve a customer accomplice. Some of these tactics include:
- Sliding: Intentionally obstructing an item’s barcode when scanning. Cameras register the transaction as standard, but the accomplice posing as a customer doesn’t pay for that merchandise.
- Sweethearting: Giving an inappropriate discount to friends, family or other accomplices.
- Stripping: Using an independent barcode scanner instead of the store’s scanner to scan gift cards, making it appear as though the cards are being treated as a legitimate transaction. The gift cards are then activated and used. The cards may be returned to the rack to circumvent inventory controls, but the card is now worthless.
- Thimblerigging: Creating commotion at checkout so that items can be taken without detection. This can be done by the employee removing the barcode from an item or by orchestrating a scene involving an honest cashier and relying on the innocent employee’s confusion to avoid the accomplice paying for an item.
- False void fraud: Keeping a customer’s receipt, then using it to create a fictitious void and returning the charge to the complicit customer.
READ MORE: Learn how these solutions and services can help your retailer.
Card-not-present transactions — where neither the card nor the cardholder are present during payment — is another form of employee abuse. If a retailer allows CNP transactions, employees may be privy to cardholders’ verifying information, such as a CVV number or billing address. All an employee has to do is use that information, either at the retailer he or she works for or at another retailer, to commit CNP fraud.
Powerful Tech Solutions That Combat Employee Fraud
Training employees on proper procedures and on the overall impact of employee fraud can deter bad behavior. Technological solutions can help prevent employee fraud by setting up guardrails, and can help retailers detect fraud when it does happen. Here are three ways technology is helping retailers fight employee fraud:
Retail video surveillance monitoring: Computer vision can detect unusual behavior, such as chaos at checkout, employees visiting stock areas an inappropriate number of times and body language or movements that signify fraud patterns. Smart cameras watch critical areas of the retail space in detail, and video analytics filter images that trigger suspicious activity alerts.
FIND OUT: Learn how to detect and prevent e-commerce fraud in your organization.
Authentication security software: Using the principle of least-privileged access, retailers can set parameters that give employees access to the platforms and data they need to do their job — and nothing more. Using platforms from Okta and Check Point, for example, retailers can set up multifactor authentication, biometric authentication and other access controls. These deter opportunistic employees who are searching for information beyond their level of privilege.
AI fraud prevention solutions: AI’s greatest power in a sophisticated crime landscape may be in a data-driven function known as exception-based reporting. This takes a set of data (say, voided transactions) and establishes a norm (such as how many voided transactions is standard during a shift). Then it looks for exceptions to that norm. It can search for unusual customer purchasing behavior, abnormal barcode scanning activity, inventory fluctuations and discrepancies in cash register inputs — all of which may indicate employee fraud.
As part of a holistic security approach, these tools can help prevent and detect employee fraud. It’s one way of fighting retail shrinkage that comes from within.