Unit-14

FRAUD AND THEFT ON THE SALES FLOOR

Unit-14 FRAUD AND THEFT ON THE
SAUnit-14 FRFrauds and theft AUD
AND THEFT ON THE SALES FLOLES
FLOORPLOYEE THEFT
 Types of employee theft

• Theft of Stock and Cash

• ‘Grazing’
• Collusion
 Why employee steal
• As a retailer's employees handle cash and goods
in order to do their work, they know the
weaknesses of the company's administrative
systems
• They can recognize (and may be friendly with)
supervisors, managers and security staff whose
role is to protect the company's assets.
• This is why detecting theft amongst employees is
more difficult than finding dishonest customers.
 TYPES OF EMPLOYEE THEFT
• the 'typical' staff thief is usually someone who
had been employed for less than 12 months
and was frequently a part timer.
• It is possible that the reason why so many
new employees were apprehended for theft is
that they were not very good at it.
 EMPLOYEE THEFT
• A new member of staff may not have learned to
overcome the behavioral clues often given off by
thieves,
• He or she may not know the systems well
enough to cheat effectively
• May not have been accepted by the workgroup
which might otherwise cover up for the thief.
• More experienced employees may be continuing
to steal for many years.
 EMPLOYEE THEFT
• One quarter or more of total staff
apprehensions were management grade,
supervisor, senior administrator and security
officer - the very people entrusted with
guarding the company's assets.
• They usually had unsupervised access to most
parts of the building at unsocial hours and
were able to steal, often in conjunction with
associates, over many months or years.
 Types of employee theft
 Conventional Theft
• Price Alterations
• Cash theft

 Collusion with customer thieves-

• Refund fraud,
• False markdowns,
• Sweet hearting ('discounts' for friends and family),
• Theft of loyalty card points from customers, and other
illegitimate use of discount entitlements.
 Types of employee theft
• Compared with conventional staff theft the
employee will not be found with goods or
cash on his or her person.
• The customer thief in collusive activity will
have acted like a normal shopper rather than
a shoplifter and will be much less likely to
attract the suspicions of supervisors,
managers, or security staff
 Internal control procedures

• Specific pricing procedures,

• Cash-handling procedures and
• Refund procedures are essential.
• Personnel should be rotated periodically.
• Responsibilities should be separated.
Deter Employee Theft by Price Alterations

• Allow only authorized employees to set prices

and mark merchandise.
• Mark merchandise by machine or rubber
stamp, never pencil.
• Conduct periodic audits of prices recorded
and prices changed.
• Keep a check on the “popular” salesperson.
 Controlling the cash wrap
• Establish strict cash-handling procedures.
• Use a tamper-proof recording system.
• Have each clerk responsible for his/her own
receipts.
• Have cash receipts balanced by someone else.
• Perform unannounced audits.
• Use honesty shoppers.
 Detecting the sales related theft
Honesty Shopping

• Honesty shopping,
or a shopping
service, tests the
honesty of sales
personnel and who
handle cash.
 Refunds frauds

• Require all employees to comply with the

return/refund policy.
• Keep tight control of all credit documents,
• Match items to the return vouchers.
• Conduct periodic audits of return vouchers.
 Misc. Controls

1. TECHNOLOGY 6. TRAINING
2. REPORT 7. RECOVER
3. INCENTIVES 8. INVENTORY TRACK
4. PROCESSES 9. PROSECUTE
5. SECURITY EQUIPMENTS 10. STAFF SCREENING
TECHNOLOGY
Responsibility for shrinkage is widely disseminated, henceforth
technology can help a great deal to overcome to a solution. The Radio
Frequency Identification (RFID) will be a significant driver of loss
prevention

REPORTING
The reports should be received monthly or bi-weekly. Reports must focus
on parameters like cash audit covers, no-sales, flagged returns,
employees calls, excessive markdowns or discounts, and merchandise
voids.

INCENTIVES
Working with employees a motivating factor is providing with them share
of profits that is been saved by Loss Prevention.
SECURITY EQUIPMENTS
The security equipments will help in preventing ORC activities at the
premises. Some of the equipments are CCTV Electronic article
surveillance, Two-way radio sets, Ceiling mirrors, Magnetic Strips, Digital
signage, etc.

TRAINING
Staff must be imparted training in loss prevention

RECOVERY
There should be strong will and passion for recovery of loss from the
person responsible for loss.
INVENTORY TRACK
The purpose of inventory tracking is to ensure that while some of your
capital must be tied up in inventory, it does not hinder your company’s
cash flow or waste employee’s time. Set aside sufficient space for your
inventory

PROSECUTE
Retailers should diligently follow the prosecution process of the culprits
and take it to its logical conclusion.

STAFF SCREENING
Staff should be subjected to proper pre employment, post employment
and during service screening.
 Check list for Loss prevention
commitment
• 1 There is senior management commitment
to prioritise shrinkage, oversee an action plan,
allocate resources and monitor results.

• 2 All parts of the business recognise the

value of prioritising shrinkage.
 Check list for Loss prevention
commitment
• 3 All parts of the business are taking action
to address the problem of shrinkage.

• 4 There is clear and strong leadership in

place to effectively manage shrinkage.
 Check list for Loss prevention
commitment
• 5 The company has available actionable,
reliable and timely data on shrinkage.

• 6 The company is willing to innovate and

experiment to deal with the problem of
shrinkage.
• 7 The company has developed a strong multi
functional and diverse team to deal with
shrinkage.
 Check list for Loss prevention
commitment
• 8 The issue of shrinkage is clearly and regularly
communicated across the organisation.
• 9 All parts of the company recognise the link
between poor process adherence and shrinkage.

• 10 Store managers and associates are given the

necessary data, tools and training to enable them
to deal with shrinkage effectively.
 Employee Theft Policy
• Include these five sections in your employee
theft policy:
• A statement that employee theft is prohibited:
This section should remind employees that theft
is illegal and give examples of the kinds of
employee theft that’s prohibited like stealing
cash, merchandise or falsifying time cards.
• An expectation that employees will notify
management if they see theft occurring: This
topic should also cover how employees are to
report employee theft to management.
 Employee Theft Policy
• Examples of prohibited behaviors as an illustration: This
section is unique to each business and would explain
common types of theft in your industry, such as service
workers taking company tools home or foodservice
employees giving food and drinks away to friends.
• A statement about repercussions: This section should point
to your discipline policy, state that termination is
automatic and suggest that incidents may be reported to
the police.
• Notice on your commitment to investigating theft: This
section will explain that you will follow up on all reports of
theft but will not tolerate false accusations.
 Employee terminations and arrest
• Meet with the employee and explain the data you’ve
found, such as “the video shows a company policy violation
of unpaid merchandise being taken outside the store.”
• If it’s substantial enough that you need to file an insurance
claim, consider letting the employee know that you’re
going to file a claim.
• If the employee resists being asked to leave, you might
consider file a police report on the spot (threatening to call
the police may encourage an employee to cooperate or at
least leave the premises until you can get your termination
documents and his or her final paycheck together).
 Employee terminations and arrest
• You can terminate the employee on the grounds of
failing to adhere to company standards as outlined in
the employee handbook.
• There’s no need to state that you’ve caught him or her
stealing. If you’ve already sent the employee home,
you can follow up with a termination letter or email.
• In fact, using the words “theft,” “stealing” or any other
loaded accusation may subject you to a wrongful
termination lawsuit if the person is later found not
guilty by a court.
• It would be better to state that he or she is being
terminated for “violating company policy.”
 Employee terminations and arrest
Contact Police to File a Report
• If the amount of goods or money taken is more
than $50, for example, you may want to file a
police report.
• You may need to file a report any time you’re
planning to submit an insurance claim for
missing goods as an insurance company needs
the police report number to file a claim.
• Contact your local police, sheriff or law
enforcement department to file a report.
 Employee terminations and arrest
Risks of Accusation
• Make sure that no one outside the immediate
supervisor and employee is aware that an
employee is being terminated for theft.
• In fact, accusing an employee of theft is risky as it
assumes guilt. Therefore, keep the reason for
termination vague, such as “company policy
violation” or “failed to live up to our ethical
standards” and follow your
established discipline and termination practices
consistently.
 Employee terminations and arrest
• “Theft is a matter that should be dealt with privately.
• Openly accusing the employee can make the employer
look unprofessional to the rest of the team and lead to
second-hand embarrassment and awkwardness.
• Instead, the employer should handle the situation
behind closed doors and only with the people who are
directly involved; this preserves the integrity of the
workplace and does not expose anyone to further
problems.
• As far as legal problems, spreading false information
about someone can lead to a defamation lawsuit.”