Canadian Music Trade - August/September 2021 | Page 20

By Michael Raine

COMBATTING A NEW ERA OF THEFT & FRAUD

The criminals were working from home , too . It ’ s something I hadn ’ t really thought about until doing the research and interviews for this article , but of course it ’ s true . With retailers closed to in-store shopping for much of the last 18 months , the door was also mostly shut on in-store theft . But as the Yuppie Nuremberg Defence dictates , there ’ s a mortgage and bills to pay — even for thieves .

“ What a lot of people neglected to think about in 2020 was that for a lot of these organized criminals , theft and fraud is their business . It ’ s their source of revenue ,” notes Stephen O ’ Keefe , who has earned the Retail Council of Canada ’ s Loss Prevention Lifetime Achievement Award for his three-decade career protecting Canadian retailers from criminals . He is now the principal at Bottom Line Matters , which works with smalland mid-sized retailers on theft and fraud prevention . “ A thief or a fraudster … would obviously opt not to stop their revenue stream , and so they just looked for a different way to commit these offenses . And that ’ s why some of these frauds were on the rise because people who would normally steal in-store , that source was cut off and so they had to look for other ways to make money . But , don ’ t get me wrong , these criminals pay their hydro bill and their water bill and their mortgage with money they get from the frauds . You can ’ t just cut them off thinking , ‘ Oh , well , obviously we ’ re in COVID-19 times so everybody ’ s going to adapt to the changing environment .’ But the thieves didn ’ t .”
It ’ s no surprise then that a study from LexisNexis Risk Solutions found that retail fraud went up in 2020 in the U . S . and Canada . In the report , entitled 2020 True Cost of Fraud Study : E-commerce / Retail Edition , there are these three key takeaways : 1 ) More fraud attacks translated to higher costs for merchants , with the average number of successful fraud attempts increasing for all sizes of retailers , though it was especially costly for mid- and large-sized retailers , who experienced up to 70 % more fraud attempts in 2020 ; 2 ) A surge in online and mobile purchasing meant a parallel increase in online fraud ; and 3 ) Distinguishing customers from malicious bots and fraudsters became more difficult , and it became especially hard for retailers to balance fraud prevention with providing a smooth ecommerce experience for legitimate customers .
And when stores have been open during the pandemic , that also provided new windows of opportunity for thieves .
“ The bottom line is this — losses went up . The National Retail Federation in the U . S . reported the highest shrinkage rate in over 30 years in 2020 . Yes , the controls were put to the test with limited resources , in many cases , for businesses to execute their standard operating practice , but there was also the health and safety aspect — how does a loss prevention professional , safely and at a socially-acceptable distance , stop somebody from getting away with a theft when the stores were open ? The sad news is , many didn ’ t ,” comments O ’ Keefe .
“ The loss wasn ’ t worth the risk , and the thieves knew so and took advantage of the vulnerability of the times . Things are changing now , but sadly shoplifters are lagging and still taking their chances .”
In terms of one of the types of fraud facing small- and mid-sized retailers , especially those with less experience in fraud prevention , credit card fraud has become sadly common . It ’ s pretty straightforward and involves thieves using stolen credit cards to purchase goods and then reselling them for cash . For retailers , if they don ’ t have the proper protocols and prevention measures in place , they get dinged with a chargeback from the bank and are now out both the stolen product and the cost of it . Sadly , the experiences of Sherwood Music in Kitchener , ON provide a good lesson in how this fraud can work and how retailers can get hit hard .
CTV News first reported in January 2021 that two fraudsters purchased six Gibson guitars from Sherwood Music in separate credit card transactions over the phone . The store took the card information , including
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