Inside Retail Fraud

Recent studies show how the retail industry is affected by occupational fraud.

Employee theft is a costly crime for retailers, accounting for 8 percent of all retail crime losses, according to The British Retail Consortium’s (BRC’s) Retail Crime Survey 2008.

Retail is the fifth largest industry affected by occupational fraud, with 7 percent of cases yielding an annual median loss of US $153,000, according to the 2008 Report to the Nation on Occupational Fraud and Abuse, published by the Association of Certified Fraud Examiners (ACFE). Employee theft in a retail setting can take many forms such as skimming, billing, merchandise theft, check tampering, and cash register disbursement. The ACFE report shows that register disbursement accounts for 16 percent of retail fraud. Furthermore, retail fraud isn’t restricted to brick and mortar stores. The BRC survey shows Internet fraud growing as online retailing expands. Among the respondents, almost all retailers selling online suffered fraud in 2008, and two thirds said it was increasing.

The ACFE report cites lack of controls, absence of management review, and override of existing controls as the three most common factors that allow fraud schemes to succeed. “Part-time Job, Full-time Losses,” featured in the April 2005 issue of Internal Auditor magazine, offers a real-life example of a shoe salesman in an upscale store who makes the most of a major lapse in controls.

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