Growing up, when we received a gift in an envelope during the holidays, it was usually a nice crisp $5 or $10 bill from Great Grandma. She wasn’t able to get out and shop easily and she also would have had no idea what to purchase for her young great grandchildren. Had she been alive today, the envelopes she handed out would more than likely hold a gift card. A recent NRF survey found that for the 5th year in a row, gift cards remain the most requested holiday gift. It is expected that American Consumers will spend $27.8 billion in total gift card spending in 2011. Click here to read more. With this increased number, the fraud exposure will be sure to grow – both internally and externally.
The theft and fraudulent use of Stored Value Cards or SVCs is another way that associates have found to try to take advantage of the system. When analyzing your SVC data you may want to look at few of our favorite reports from the SVC Incident Category:
ü Merchandise Credit Issued and Redeemed Summary
ü Multiple SVC Same Transaction
ü SVC Issued and Redeemed by Same Person
ü SVC Issued and Redeemed Same Day
The “SVC Issued and Redeemed on the Same Day” report is excellent for highlighting several high risk situations. For example, we all know that the average shopper will not purchase a SVC card and then turn around and use it the same day. If you see this happening it could be a situation where the associate selling the gift card keeps the live one and gives the customer a blank. The “good” card is then used for another sale and the associate keeps the cash. Also look for situations where the card is purchased on a regular sale and redeemed as an Employee Sale. This is a great indicator of employee discount fraud. Finally, watch for SVCs that are issued in a regular refund and redeemed on an Employee Sale – especially if the same person uses it. These scenarios are quickly identified by using filters. More detailed steps on creating this will be posted on our LinkedIn page.
It amazes me that some associates are so greedy that they want their employee discount even when they are paying for the merchandise with a fraudulently created or stolen gift card. But then again, if they were smart, they wouldn’t steal. Using the “SVC Issued and Redeemed By the Same Person” report will identify situations where the selling associate is the same as the person who redeems the card on an Employee Sale. There are few situations where this is a legitimate transaction, so hits on this report are a great indicator of theft.
Many retailers have reported situations where the associate keeps SVCs with small balances, telling the customer that they have been used up. These cards accumulate and are then used on their own transactions later (remember the greedy factor??). Look at the “Multiple SVC in Same Transaction” report with a sub report for Employee Purchases – when you see lots of small value ones, there may be a problem!
This is also the season where many companies issue promotional gift cards when a customer achieves a given sales threshold or for other things like being one of the first hundred people on a given day. This type of promotion is great for driving business but is a tempting target for associates. Watch for these cards showing up on employee purchases or for an associate who is either issuing or redeeming a card on every transaction. It could be an integrity issue or a training issue – it is probably something that should be checked out.
Many retailers have reported situations where the associate keeps SVCs with small balances, telling the customer that they have been used up. These cards accumulate and are then used on their own transactions later (remember the greedy factor??). Look at the “Multiple SVC in Same Transaction” report with a sub report for Employee Purchases – when you see lots of small value ones, there may be a problem!
This is also the season where many companies issue promotional gift cards when a customer achieves a given sales threshold or for other things like being one of the first hundred people on a given day. This type of promotion is great for driving business but is a tempting target for associates. Watch for these cards showing up on employee purchases or for an associate who is either issuing or redeeming a card on every transaction. It could be an integrity issue or a training issue – it is probably something that should be checked out.
External theft also occurs with SVC’s. Review the “SVC Issued by Tender” report and really focus on large gift card sales that were purchased with acheck or a fraudulent credit card. Many of these fraudsters are putting these cards out to auction so by checking the validity of the purchasing account, you can decommission cards that were purchased with bad credit cards or checks. Aspect retailers have reported six figure savings by using this process!
Another external fraud issue is the cloning of cards in the stores. Be sure that stores know to contact Loss Prevention if there is a sudden disappearance of blank gift cards in the store. That way you can be alert to possible upcoming fraudulent activity.
There are many ways that employee and dishonest customers can be committing gift card fraud. LP Innovations has published an article with even more ways that you may want to protect yourself this Holiday season. You can view this article at this link http://www.lpinnovations.com/page/86-gift_card_fraud/.
Along with these tips, it helps to make sure that gift cards are being disposed of properly and that you have a specific policy for dealing with cards left behind by customers. While some associates may want these excess cards to make wonderful items like gift card rugs, others may see this as a green light to take their own little holiday gift from you.
Just another Aspect of my day,
Shannon
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