Fraud Prevention Month: Tips for Retailers

    Mar 20 2014

    Fraud Prevention Month marks its 10th anniversary in March. The Competition Bureau, along with 125 law enforcement agencies and other private and public organizations, hold a variety of events throughout the month to inform and protect the public against fraud. As part of a series on fraud protection, CashTech Currency will write about various ways that businesses and organizations can protect themselves. This week’s focus is on methods retail businesses can use to prevent fraud.

    Retail businesses face a number of challenges when it comes to fraud. On one hand, retailers need to offer customers a high level of service that respects them without calling into question their ethical values. On the other hand, they also have to protect themselves from the small number of customers who do their best to defraud the business through hard-to-detect methods of fraud. Here are some of the most popular methods of fraud, along with ways that it can be combated. 

    Payment card and cheque fraud

    Stolen payment paraphernalia can be used to defraud a retailer. This paraphernalia includes cheque books, cheque guarantee cards, and credit or debit cards. The fraudster may possess documents that would seem to verify that they are the rightful users of the stolen cards. The card may have evidence to suggest that a fraudulent action is in the works. Train your staff to check the signature strip for signs of tampering. It’s important to also check the card’s start and expiry dates. Ensure that signatures match by examining the card signature with the customer’s signature. Check supporting identification. Staff should seek authorization from higher up where appropriate. Of course, counterfeit detection equipment is the best way to catch fraudulent currency.

    Credit fraud

    Retailers who allow credit have a vulnerability to fraudsters who provide a genuine address and other authenticating details, but who move on before paying what they owe. Establish strict vetting procedures before granting credit to customers. Impose credit limits, and don’t allow customers to exceed them. Do not allow further credit to customers who have large long-term debts that they have been failing to pay on a regular basis.

    Refund fraud

    Refund fraud is another method that may be used to by customers to defraud a business. Fraudsters may return stolen goods to a store to receive a refund. They may use forged receipts or genuine receipts from previous transactions as “proof of purchase,” or may claim to have lost the receipt. An emerging trend is “wardrobing,” which refers to people who purchase clothing or tools, use them for a period of time and then return them, essentially renting them for a period of time

    By establishing set policies for dealing with refund claims, you will be able to manage the number of refund claims that you’ll receive. However, ensure that these policies don’t infringe on the customer’s rights. You can refuse to refund for goods that have no defects, when the customer has simply changed his or her mind, and when the respective customer has altered the clothing in some way or kept them for a reasonable amount of time. Insist upon proof of purchase, and that the original packaging is returned with the goods. Keep a record of refund claimants and check for regular ones. Some customers may damage goods and claim that they purchased them in that condition. It is wise to train your staff to thoroughly check and operate products in front of the customer. The onus is then on the customer to choose whether he or she is satisfied with the product’s operation. This makes it more difficult for a customer to claim a refund on a product where the defect is noticeable, thus making it unlikely that a sale would have occurred. 

    Counterfeit currency and gift vouchers

    Be alert for the presence of counterfeit currency. Forgers tend to produce large denomination bank notes. Gift vouchers are easier to forge due to their simpler design. Train staff to check for signs of counterfeit bills. Make sure your employees are aware of any cheques that are built into gift vouchers to verify their authenticity, including the design and the quality of the paper.

    Supplier fraud

    Retailers potentially face fraud from their suppliers. Suppliers may overbill. The invoice the retailer receives “might reflect charges for a greater number of goods than the customer actually received.” Another danger is delivery of sub-standard goods. 

    During the stock checking process, ensure that your deliveries match your orders. Check the invoice carefully to prevent against overcharging. Check that your delivered goods aren’t faulty and that bar codes and electronic tags are fully functional. Be extremely cautious about making any advance payments for deliveries. Fraudulent companies will disappear without fulfilling on the delivery, or may deliberately go into liquidation.

    Closed Circuit Television is an excellent tool

    Finally, closed circuit television is an excellent tool in both deterring and detecting fraudulent customers. For them to be effective in the event that they are needed for evidence, they must provide good quality footage, and the recordings need to be date and time stamped. They can serve as a psychological deterrent if they are place in full view of customers. Also, warning signs can be placed to inform customers that CCTV is in use. 

    Andrea Lombardi

    Andrea Lombardi

    Andrea joined the CashTech team upon its inception in 2003. Learning the business from the ground up, she now utilizes her expertise in account management, planning, and negotiation while managing the daily operations of CashTech’s sales, marketing, and logistics departments. Andrea holds a bachelor’s degree from the University of Western Ontario. She enjoys travelling and has a passion for personal fitness, including obtaining her kettlebell certification. Andrea lives in Toronto with her husband and two young sons.

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    CashTech Currency Products Inc.
    1040 Cardiff Boulevard
    Mississauga ON, L5S 1P3