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I suspect return fraud from one of my employees – what can I do?

There are several steps you can take to ensure your employees process only legitimate returns. Start by putting your return policy in writing.

Summary

Return fraud is a growing problem for many small businesses – but that doesn’t mean you’re helpless. Training your employees on your return policy and setting guardrails can help you minimize the risk.

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Dear Your Business Credit,

What if you suspect an employee processed an unauthorized return to a prepaid debit card but cannot prove it? – Mike

Dear Mike,

It’s a good thing you’re paying attention. Return fraud, where an employee conspires with someone else to fraudulently return goods to get a refund, is a big problem for retailers.

In one of the most common types of return fraud, someone shoplifts merchandise, then returns it to the store for a refund.

The National Retail Federation’s 2019 National Retail Security Survey found that, among retailers, 12.7 percent said return fraud had become a greater priority for their organization in the past five years; another 38.1 percent said it was somewhat of a greater priority.

See related:  I’ve been a victim of card fraud but my bank won’t help

Check out all the answers from our credit card experts.

Ask Elaine a question.

How to fight return fraud

So what can you do about it? The most popular type of loss prevention program for retailers is an anonymous hotline. If you suspect that some type of organized return fraud is taking place, setting up a hotline could make sense, especially if you run a substantial-sized small business.

  • In the meantime, make sure you have put your store’s return policy in writing and discussed it with your employees.
  • One way to protect yourself is to make sure every return is subject to at least two people’s scrutiny.
  • You might require a supervisor to sign off on every return. This could be easily feasible if you are running a smaller business.

How to discuss return fraud with employees

What if you have good procedures in place but this employee didn’t follow them?

A tactful way to bring this up with the employee might be to say something along the lines of, “To process a return, employees need to get a supervisor’s approval. There was one return I noticed where I don’t have a supervisor’s signature on file. This was processed during your shift. Could you tell me what happened?”

Keeping the focus on whether procedures were followed will avoid a situation where you are accusing an employee of wrongdoing.

It is possible the employee made an innocent mistake. Stay mindful of that, or you could damage the employee’s reputation – which could then become a legally sensitive matter. Do not discuss your suspicions with other team members. Word travels quickly.

How to proceed with potential return fraud

If there were suspicious circumstances, you may need to do some more detective work. Let’s say you are a retailer and no one returned any goods to the store – but a refund was processed. That would be a red flag. You’d need to ask the employee what happened to the merchandise.

Another red flag would be a return processed to a different card than the one the charge was originally made on. If you noticed anything unusual like this, you would again need to ask the employee what happened.

When it’s time to call the authorities

In the worst case scenario, you’ll discover something illegal was done. In that case, it would be a good idea to go to the police and have them investigate. It’s possible that what you’ve discovered is the tip of the iceberg.

Going forward, make sure you invest in a thorough background check for new hires. It may cost you a couple of hundred dollars, but compared to what you might lose to theft by hiring the wrong person, it’s well worth it.

Editorial Disclaimer

The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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