Refund fraud is a significant contributor to loss incurred at a retailer’s tills.
Types of refund fraud
Losses incurred in this way commonly materialise in stock loss, where it is all too commonly attributed to non-delivery or shoplifting. A typical incident of refund fraud will involve a cashier issuing false refunds for stock that was never sold and where a customer is not actually present. This refund method is carried out by the cashier alone:
- Scanning an item nearby
- Entering a known item code
- Using the department key
The value of the refund is normally added to a credit card (often using multiple cards on different occasions) or, more recently, ‘gift cards‘ or ‘refund cards’. Sometimes it is simply refunded as cash.
To facilitate easy removal of cards or cash to avoid detection via any staff search processes, a cashier will often work together with another off-duty staff member or customer. Together with the use of the price override function, refunds can be a method of inflating the value of genuine refunds for ‘friends’. False refunds are often used as a method of concealing cash theft from tills, as the end of day till balances will not show a loss. Refunds with no sales following soon after can be an indicator of such fraudulent activity. It is worth noting that refund fraud is commonly carried out by cashiers with some supervisory capability. Loss Prevention tools provide an effective way to give store managers better visibility to review trading exceptions such as voids, refunds and other risk areas.