The Fraud Examiner

Holiday Fraud — Retailer, Buyer and Donor Beware

By Michael Hoffmann 

ACFE Research Editor 


With the holiday season on the horizon, fraudsters worldwide are clamoring for the opportunity to take advantage of unsuspecting merchants, consumers and donors. Holiday fraud is seen in many modes, which should put the general public and fraud examiners on high alert as the holidays hit full stride.


Return Fraud 

Return fraud is an issue that plagues retailers throughout the year; however, bustling holiday crowds and overstocked shelves provide greater opportunities for dishonest shoppers to take advantage of retailers around the globe. According to the National Retail Federation’s return fraud survey, it was estimated that of the $46 billion of merchandise returned in the U.S. during the 2011 holiday season, $3.5 billion involved return fraud. To combat this enormous loss, retailers must take measures to address this problem, even in the midst of the busiest shopping period of the year.


This type of fraud can take many forms, and it is not uncommon for employees to be a part of the scam. For example, ringing up a fake return and pocketing the cash is a popular return fraud option. In this case, no inventory is returned, so the loss is recorded as shrink, and the fraud might never be detected. Detection is the initial step in fighting return fraud, and that is extremely difficult to achieve during the hectic holidays.


The methods used to prevent this fraud are as varied as the scams utilized by fraudsters to perpetrate this type of theft. The key is to use resources wisely and concentrate prevention efforts in three main areas: technology (e.g., return authorization system and video monitoring), strict return policies and pre-employment screening for workers.


Online Shopping Scams 

In today’s fast-paced world, shopping could not be simpler. Finding and purchasing your holiday gifts online is quick and convenient. Unfortunately, the same adjectives apply to how fraudsters view their opportunities to scam buyers via the Internet. According to eMarketer, online sales for November and December will grow to $54.5 billion in 2012, a 16.8 percent increase from the 2011 holiday months. That figure alone has fraudsters salivating for the impending holiday season.


To avoid succumbing to online scams, it is imperative for buyers to be aware of common red flags and take regular precautions. For instance, referring to the Better Business Bureau website allows citizens of the U.S. and Canada to search and confirm the legitimacy of various companies. Scam sites often offer electronics or luxury goods at a discounted price, yet the purchaser never receives said merchandise. Checking the BBB to verify that a company holds a physical address and working telephone number will help derail online purchase fraud over the holidays.

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