Retail Fraud more specifically classifies theft that occurs through deception. Commonly understood as dishonesty calculated for advantage, it is the deliberate misrepresentation of facts for the purpose of depriving retail organizations of possessions, rights or other articles of value whether by word or by conduct. Any omission or concealment that is injurious or that allows a person to take unconscionable advantage of a retail company may constitute criminal retail fraud.
Retail fraud resembles retail theft in that both involve some form of illegal taking, but there is a key difference between the two. Theft requires only the unauthorized taking of another’s property with the intent to permanently deprive the other of the property, while fraud requires an additional element of false pretenses created to induce a victim to turn over property, services, or funds. Generally speaking, there are five separate elements that must be proven in incidents of retail fraud:
(1) …a false statement of fact
(2) …knowledge on the part of the perpetrator that the statement is untrue,
(3) …intent on the part of the perpetrator to deceive the victim
(4) …justifiable reliance by the victim that the statement is true, and
(5) …injury to the victim as a result.
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Because retail fraud involves more planning than does theft, punishments may involve greater severity in incidents of fraud.
When a crime involves fraud, it is implied that some type of deceitful action has taken place when committing the offense. For this reason, cases involving fraud become more complicated and can be very sophisticated, involving many elements of deception. As the depths of our technology and other advancements continue to evolve, these incidents—and their solutions—will only continue to grow more complex. Fortunately, our tools for detecting and resolving incidents of fraud continue to evolve as well.
Forms of retail fraud that frequently occur in the retail environment would include but are not limited to:
• Employee Refund Fraud : The false transaction is completed and the employee takes the cash, credits a credit card, or receives a gift card.
• Customer Refund Fraud : Incidents of customer refund fraud would involve customers that attempt to return stolen merchandise in exchange for cash, credit, gift cards, or other merchandise.
• Under-ringing/Sweethearting : This common type of fraud involving collusion between employees and customers.
• Use of Counterfeit Currency : Those who knowingly pass counterfeit money would be committing an act of fraud by passing a false form of tender.
• Credit Card Fraud : This type of fraud involves the use of credit cards as the form of tender to obtain goods or services, and typically originates with the theft of the actual credit card or the account number.
• Gift Cards : These are offered by most retailers as a quick and convenient form of tender for the consumer. There are a variety of ways that gift card fraud can occur.
• Check Fraud : This involves the unlawful use of one or more checks or a checking account with the purpose of illegally obtaining goods, services, or money when funds do not exist within the account balance or the account holder’s legal ownership.
• Coupon Fraud :Mis-redemption is a common form of coupon fraud that transpires when a coupon is redeemed for products that are not purchased by written rule on the coupon. Counterfeiting is also common in coupon fraud.
• Government Assistance : There has been significant fraud and abuse in many of these programs which directly impacts the retail industry.
• Commercial Account Incidents : These can occur when an unauthorized user or dishonest employee bills product to a commercial account without the permission of the account holder, or additional items may be billed to the account at the time of a legitimate purchase.
• Online Fraud Incidents: Our reliance on information and information processes has made our companies stronger, faster, and more cost-effective. But that same dependence also poses certain business risks.
• Identity Theft : This involves the unauthorized or illegal use of key elements of another individual’s personal information and assuming that individual’s identity for personal gain.
• Workers Compensation : Fraud incidents can occur in many forms, and can involve employees, employers, insurance carriers, medical providers, and others seeking personal or financial gains.
• Trademark Infringement/Brand Protection : A “brand” is a collection of symbols, experiences, and associations connected with a specific product, service, person, company or other entity. A brand is therefore one of the most valuable elements of a company’s reputation and marketing efforts.
• Embezzlement: This is a type of theft involving a person or persons entrusted to property owned by someone else (such as an employee) who then uses fraudulent means to illegally misappropriate the property or cash entrusted to them.
• Kickbacks : These involve any money, fee, commission, credit, gift, gratuity, or compensation of any kind which is provided, directly or indirectly, to someone for the purpose of improperly obtaining, rewarding or otherwise influencing favorable decisions, performance or other preferential treatment.
•Payroll Fraud: This type of fraud and abuse issues can occur in a number of ways in the retail environment.
• Expense Fraud: The potential for falling victim to incidents of expense fraud is present in every organization, regardless of the size of the company or the type of retailer.
The trade in counterfeit merchandise globally is getting worse, and US retailers are being hit the hardest, according to a 2017 report from the Organization for Economic Cooperation and Development and the European Union’s Intellectual Property Office, “Trade in Counterfeit and Pirated Goods: Mapping the Economic Impact.”
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