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Tyco - Building your defenses against organized retail crime

Tyco Retail Solutions recently published a whitepaper focused on retailers and organized retail crime. Over the next few days the Daily will be publishing the report in parts. Here's part two. To view the entire article click here.

Contributing factors
Increased economic pressure on consumers has probably led to greater participation in organized shoplifting and tolerance of purchasing stolen merchandise. But more important are permanent structural changes in global retail markets:

• New distribution channels include online stores, distributors, and auction sites, which are far more efficient than the old networks of street vendors, flea markets, and other informal channels.
• Multiple price points advertised by online vendors dilute the pricing power of valid priced products and raise shoppers’ expectations of a deal.
• Cross-border mobility of people supports theft by itinerant gangs throughout Europe, and in the US from Puerto Rico and Central America. And global shipping allows goods stolen in the US, for example, to be sold overseas, often at much higher prices.
• Easy monetization, through return fraud and gift cards that may be consolidated and sold online, raises thieves’ returns: goods with a street value 30% of retail may be sold online for 70%, or returned and converted into gift cards at 100%.

Like retail theft itself, monetization activity resists direct measurement, but indirect data point to widespread abuse. Over one-quarter of surveyed retailers believe that more than 50% of "new in box" and "new with tags" merchandise sold online is stolen or fraudulently obtained and fraudulent returns account for a $9.6 billion annual drain on US retailers’ profits.

The rising presence of both theft and monetization associated with Organized Retail Crime comes at a time when gang activity of all kinds is undiminished. Retail loss-prevention and security staff are being pared back in a soft economy and as smaller store footprints reduce revenue support for in-store Loss Prevention staff. Technology plays a role, too, especially mobile phones that offer Instant Messaging and "push-to-talk" features gangs use to coordinate their activities (see sidebar, "Organized Retail Crime: Gang Organization and Methods").

Organized Retail Crime: Gang Organization and Methods


Segregation of roles is typical of retail gangs; for efficient deployment of specialized skills, and to provide "cut-outs" that limit the damage in case a team member is identified or apprehended. Most gangs are headed by a director who controls "business" interactions such as managing travel and shipping, handling the group’s cash, and interacting with bail bond agencies. A second specialty is lookout or countersurveillance teams, responsible for reporting when the gang’s activities, including those of the lookouts themselves, have drawn the attention of store security or law enforcement.

In-store "boosters" (who steal the merchandise) and "mules" (who take it out of the store) will exchange roles as needed to carry out a theft or avoid detection. Depending on the gang’s experience and sophistication, they may:
• Prepare merchandise for theft, marking it with pennies or store flyers, removing Electronic Article Surveillance tags in fitting rooms.
• Conceal goods in fitting rooms or under-stock drawers for quick removal.
• Distract store employees by applying for store credit cards, calling the department and hanging up, or hiding a size or style of apparel and then requesting it.

Boosters steal merchandise using a dizzying variety of methods and tools:
• Booster bags, boxes, purses, baby strollers, laptop bags, etc. are lined with many layers of aluminum foil to defeat Electronic Article Surveillance (EAS) systems. Sophisticated gangs make sturdy custom bags, often with four handles, and disguise them as bags from a national brand with presence in the target mall.
• Booster clothing is a variation on this theme, and includes pants, dresses, overcoats, skirts, and girdles. Experienced security personnel look for shoppers overdressed for the weather, holding garments in front of them as they walk, and moving slowly.
• Tools include keys for display-cases and under-stock drawers, makeshift or stolen EAS removal tools (that may also be used as weapons), and even sophisticated EAS jamming devices, sold openly online as "demonstration devices", often for thousands of dollars.
• Alternate methods of theft include "box stuffing" of expensive merchandise into the emptied boxes of large, cheap items, and "ticket switching", covering or replacing barcode tags with tags stolen or copied from cheaper items.

Evasion and getaway
To conceal their theft, booster teams redistribute merchandise and take hangers along with garments. "Mules" take merchandise out of the store to a rental car parked in the lot.

"Drop" vehicles have stolen, obscured, or missing license plates. Keys are carried separately from the remote-locking fob so security and law-enforcement personnel can’t find the car just by walking through the lot. The focus of activity is the back seat, not the trunk. Merchandise is concealed there under motel blankets, why motel blankets? often by another gang member sitting in the rear seat with the car’s engine off. Sometimes the rear seat is removed to make room for more merchandise.

Organized Retail Crime gangs still use physical fencing through pawnshops, flea markets, and street corners, although e-fencing through auction sites and web pages has become much more common.

The gangs also monetize their take by exploiting store refund and gift-card policies. They use multiple methods to generate "cash" receipts. For example, many stores issue cash receipts for returned merchandise if the thief presents any amount of cash, for example to "buy" a slightly more expensive item. The thief then returns the "purchased" item, using the cash receipt for a cash refund, pocketing the full value of the original stolen item. They also return unreceipted items for gift cards that they consolidate into large denominations and sell online, for faster payout and better margins than they could get by fencing the merchandise.

Gangs’ financial specialists seldom limit themselves to just one scam—creditcard and check fraud, often for gift cards, is common. And sophisticated gangs counterfeit receipts using stolen rolls of receipt stock and portable printers.

Comparison with local offenders
Organized retail criminal gangs are disciplined, focused, and use far more sophisticated methods than local habitual offenders, who often leave hangers and defeated EAS tags behind them. Local criminals also typically have records of multiple crimes involving theft and fraud—for which they are often on probation.

Tomorrow more on defenses and countermeasures.

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