The Biggest Retail Employee Theft Red Flags

Posted on 02.19.2020

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Employee theft in the retail industry is a big concern. Retail loss prevention can already be difficult enough to handle, but fraud from employees adds a whole new layer of security risk.

The retail industry relies on temporary staff during busier times of the year, like the holidays. Being able to trust those employees, even short-term ones, is vital.

Unfortunately, that’s not always possible. The Association of Certified Fraud Examiners (ACFE) 2018 Report to the Nation analyzed 108 cases of retail occupational fraud (meaning it was caused by employees, managers, or others inside the organization). The median loss per case was $50,000. And in many cases, that remuneration was never fully recovered, even when the perpetrator was caught.

Read on for insights from the ACFE that could affect your retail employee theft due diligence.

Most Frequent Types of Retail Fraud

Of the 104 cases analyzed by the ACFE, the most common schemes in the retail industry were:

  • Theft of non-cash assets: 34%
  • Corruption (conflicts of interest, bribery, illegal gratitudes, economic extortion, and so on): 28%
  • Billing: 20%
  • Cash on hand: 19%
  • Register disbursements: 13%
  • Skimming: 13%
  • Financial statement fraud: 12%
  • Cash larceny: 10%
  • Check and payment tampering: 9%
  • Expense reimbursements: 8%
  • Payroll: 5%

Theft of noncash assets was the most common type of occupational fraud within retail — which is concerning if you’re only screening candidates who are in cash handling positions. This is one of the costliest and most common scheme types.

Behavioural Red Flags of Fraud

The ACFE identified six common red flags that preceded fraudulent activity. These were:

  • Living beyond one’s means (41%)
  • Financial difficulties (29%)
  • Unusually close association with vendor/customer (20%)
  • Control issues, unwillingness to share duties (15%)
  • Divorce/family problems (14%)
  • “Wheeler-dealer” attitude (13%)

In 85% of cases, fraudsters displayed at least one behavioural red flag. And in 50% of cases, they exhibited multiple red flags.

At the employee level, the most common red flags found were:

  • Financial difficulties
  • Complaining about inadequate pay

Women were more likely to display signs of:

  • Financial difficulties
  • Divorce/family problems
  • Instability in life circumstances

Whereas men were more likely to have:

  • Unusually close associations with a vendor/customer
  • “Wheeler-dealer” attitude
  • Excessive pressure from within the organization

What’s telling about this is that in many cases, employee fraud might have been prevented with more due diligence upfront — or knowing what signs to watch for.

Surprising Information

When employee theft and other fraud is caught, most workplaces were likely to terminate the employee. But they didn’t necessarily report the theft. And one-third of employees were not terminated as a direct result of committing fraud. Instead, they might have also been allowed to resign or placed on probation.

Past behaviour can predict future patterns – but you might not be able to spot it so easily. There may be not a record, either criminally or even on the candidate’s resumé. In this case, conducting a thorough employment reference check is even more important.

Key Takeaways for Retail Hiring Managers

  • Perform pre-employment screenings for all retail candidates – even if they don’t handle cash.
  • Place an emphasis on credit checks and employment reference checks with targeted questions about past behaviour.
  • Consider post-employment screenings, too, and paying attention to red flags in long-term staff.

Read the full ACFE 2018 Report to the Nations here: https://s3-us-west-2.amazonaws...

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Triton makes it easy to conduct pre- and post-employment retail screenings at volume. Learn more about our credit check screenings, employment reference checks, and other solutions by calling 1-844-874-8667 or visiting