Will “Need versus Greed” Increase Internal Theft?
According to UK crime figures, the coronavirus pandemic has resulted in a drop in reported incidents. But are we about to witness an epidemic of COVID-related internal theft as retailers face the perfect storm—a confluence of “need versus greed,” greater opportunity, and reduced supervision?
Like our everyday lives, the crime landscape of the last fifteen months has been transformed by COVID-19, not least in our retail environments where non-essential stores were closed for long periods during 2020 and 2021. While traditional incidents of shoplifting were reduced in mothballed non-essential stores, lawbreaking on our high streets mutated with the creation of new offences to meet new challenges, including the first coronavirus fines for non-compliance with new rules around social distancing and face coverings.
These fluctuations in offences, because of the impact of restrictions on our lives and changes to community safety, are likely to have a legacy effect for years to come as a new normality comes into play, even when restrictions are lifted.
Levels and types of crime are always changing, but in general terms, the trend has been downwards since the mid-1990s. The most reliable and in-depth measure is the Crime Survey for England and Wales, but that face-to-face survey has had a challenging year because it had to move to gleaning data at a distance via telephone calls. Taking that into account, the best we can say for sure is that total crime reported to the Police (the second way we count what’s going on) has fluctuated quite considerably.
In the year to September 2020, Police-recorded crime had the biggest annual decrease since 2010, albeit with some variations by specific offence. Robbery and theft dropped dramatically during 2020 for the simple reason that there were fewer people out and about with everyone being at home all the time, which made it more difficult to burgle a house. Likewise, on the high street, there were fewer store burglaries reported.
Despite this downward trend, however, crimes driven by the pandemic have increased. Worryingly, incidents of domestic violence have skyrocketed with victims trapped at home with their abusers. These incidents are even more insidious as they are often witnessed by small children. Figures for court orders to protect victims—typically injunctions that ban a suspected perpetrator from going near their former partner—have risen because of the number of suspects the Police have released while the cases remain under investigation.
Incidents involving the theft of dogs, often to order, have also soared as the nation has looked to pets to get them through a hard year. Another crisis-driven crime has been the increase in fly-tipping as local authority recycling centres have been either closed or operating an appointment regime due to the pandemic.
Silver linings have come in the form of more time for Police to investigate serious offending. In London for instance, the Metropolitan Police began running more proactive drugs operations because dealers and suppliers were easier to find as they struggled to move freely during lockdown. These wins are short-lived when put into the context of the pandemic’s impact upon the wider criminal justice system. A 57,000-case backlog of crimes awaiting trial in the Crown Courts compounds what was already a pre-pandemic build-up of 39,000 prosecutions. Some cases will not go before a jury until 2023 despite the Ministry of Justice opening more Nightingale Courts to manage the workload.
Police have also had to enforce new COVID rules for restriction breaches, which have dramatically increased. Two-thirds of all fines handed out since the UK’s third lockdown in December 2020 have been COVID-related, an issue compounded by unclear enforcement guidance, leading to lurid headlines such as the case where two women walkers were fined in Derbyshire for having cups of tea in their hands.
Against this febrile backdrop, retailers (who have not had the best experience of Police engagement over the last few years) have the added challenge of vigorously tackling what they fear could be a new crime epidemic as a direct result of the lockdown—that of internal theft or “the enemy within,” those trusted employees who, for whatever reason, have chosen to abuse their positions. The impact of the virus on the high street has led to many people losing their jobs or being furloughed, with some households having to take second jobs and even resort to dishonesty out of “need rather than greed.”
One head of LP told Loss Prevention Magazine Europe, “External theft during the lockdown has not posed too many issues as offenders tend to stand out like a sore thumb. The worry is the internal theft issue. We don’t know what that is going to look like and how many otherwise honest people facing financial pressures as a result of the pandemic will turn to theft. In the current climate, there is a lot of opportunity and often less in the way of supervision as a result of furlough and restructuring.”
Another regional LP manager said, “Many retailers have taken their foot off the gas when it comes to internal theft. They simply have not been focused on this issue in stores. We have picked up more instances of stealing in [distribution centres]. There could be more examples of theft we have not identified around mobile payment systems and gift card or procedural abuses.”
Alan Grocott, trainer for Wicklander Zulawski, said motivation is a key driver of dishonesty. “During investigative interviews, we train how important it is to identify, where possible, the probable motive for why the subject may have committed the wrongdoing,” he said. “Now we can add to the list of motives. It could be financial problems caused by the pandemic and lockdown, addiction to substances or gambling, or peer pressure or collusion in a post-pandemic world where there are fewer layers of supervision and perhaps greater lone-working opportunities. The cost of street drugs has increased dramatically because of scarcity caused by Police seizures, which could lead to greater levels of desperation, or there could be an involvement of coercion of someone else who is dependent.”
The ECR Retail Loss Group held a series of seminars with international retailers during the spring of 2021, one of which took place on 25 March and was focused upon the issue of internal theft. The scene was set by Adrian Beck, emeritus professor of criminology at the University of Leicester and academic advisor to the ECR. He told the seminar that internal theft was a sensitive topic that in the retail setting was often ignored or overshadowed by external theft and interventions to prevent shoplifting, which he called the “blame the outsider” culture. This, he suggested, was due to the taboo surrounding internal theft because of how it negatively reflects upon the business and the fact that those involved in the dismissal of internal fraudsters are often those responsible for their recruitment in the first instance and therefore in some way culpable.
Adrian, who published his last report on internal theft in 2006, said very little existed in the way of research. Richard Hollinger and John Clark defined the problem in 1983 as “the unauthorised taking or transfer of money or property in the formal workplace by an employee during the course of the occupational activity which is linked to their employment.”
It is not just the theft of physical goods but also “production deviance,” the theft of time when staff are not engaged in productive employment, and “policy deviance” where workplace rules are broken or abused such as in the instance of a staff discount being used by a colleague’s family or friends.
Because of the stigma attached to internal theft, there is often a lack of reporting or prosecutions resulting in very little hard data as far as official figures are concerned. Estimates for the extent of the crime therefore vary from between 24 and 47 per cent of all shrinkage, leading Adrian to conclude that official statistics in this instance are largely irrelevant.
The rationalisation for internal theft includes increased opportunity with perpetrators surrounded by high-value items or with access to secure areas because of their positions of trust. Combined with the low risk of being caught or challenged as a result (for example, because of fewer checks due to the pandemic), a perfect storm of no or low-risk opportunity to steal emerges. These lighter checks could be due to COVID-related departmental restructures, redundancies, furlough, or a change in priorities with focus shifting from staff scrutiny to social distancing or face covering protocols—the “taking the foot off the gas” approach as described earlier.
A good example of this has been around a shift away from post-shift staff searches in stores and distribution centres partly because of the restrictions imposed by social distance requirements. Several retailers at the ECR seminar on 25 March said that they were reviewing or renewing staff search policies and physical intervention in light of the likely increases in staff theft, although interestingly, there was also a body of opinion suggesting that such an approach could be counter-intuitive in view of newer HR policies of inclusion and diversity in the workplace.
Another reason for staff dishonesty is financial pressure, where colleagues are motivated by external factors such as drug or alcohol dependency or debt, all issues that could be related to the pandemic, the full fall-out of which is yet to come when the chancellor removes the furlough security blanket at the end of September. Job dissatisfaction and the twisted logic of perceived entitlement for missing out on a pay rise or promotion is another justification for internal theft as is neutralisation, the suggestion that it is a “victimless crime” and that “everyone does it” as part of an unspoken company culture of tolerance towards the practice. This is often fuelled by misleading signals from line managers that fiddling is an occupational hazard.
The Staff Dishonesty in the Retail Sector study in 2006 focused on discussions with offenders and the pinch points most likely to generate internal loss, namely till areas or in the warehouses. Here, process failures were among the contributing factors to the crime, for example a manager sharing their till pin number with junior members of the team or giving unauthorised personnel access to secure areas where high-value items are caged.
Other scams include under-ringing, a scenario where the cashier uses the point of sale to ring up an item at less than its listed price. They then collect payment of the full amount (original, non-discounted price) in cash and then pocket the difference. This is pure and simple cash theft, skimming, which involves pocketing a small amount of money from the till in the hope it will go unnoticed or won’t matter when the till is counted at the close of day. Straightforward refunds, where the cashier rings up a false refund and keeps the cash, are older scams and often only detected by CCTV over the till point, combined with software highlighting only one person involved in the transaction.
More modern dishonesty includes gift card theft, which is often more difficult to detect without data mining technology. It involves an employee issuing fake refunds for gift cards that they keep and also involves handing a customer a blank gift card.
Sweethearting is probably the most talked about method of internal fraud, mainly because of the perpetrator’s audacity of carrying it out in plain sight, like a smiling assassin. Sweethearting, so named because it involves the identification of a sweetheart or colluding party, is still the biggest single cause of internal theft in the US and can involve a series of strategies. It typically involves employees at the till or self-scan point failing to ring up or heavily discounting items for the benefit of friends or family, resulting in a dramatically reduced bill.
US reports on sweethearting argue that 20 per cent of losses occur at either the checkout or self-scan point, and 80 per cent of that figure is recoverable. A report commissioned by artificial intelligence (AI) business Storewide Active Intelligence (SAI Group) argues that for every $1 billion in revenue, at least $1 million of potential loss can be retrieved.
However, the activity is not always what it seems, and referring back to a previous point, non-scanning may indeed be more about non-malicious process failure than malicious intent to defraud the business. To this point, businesses are taking a more forensic and technologically agnostic approach to the age-old problem that retailers simply love to hate.
The SAI Group’s approach, aptly named Valentine, measures and prevents losses at checkouts and self-scans. It is the first solution to take existing camera feeds and overlay AI-powered analysis from real store environments using industry-specific modelling and predictive deep learning. This means that whenever products move within a store, the SAI platform can turn the raw CCTV data into valuable insights for loss prevention, store operations, and customer behaviour analysis and provide the retailer with “on the job” analysis through its actionable reporting tools.
Iceland is one such retailer that is analysing the problem of non-scanned stock and is using a new artificial intelligence technology that works with legacy CCTV to help differentiate between malicious and non-malicious theft at the point of sale. It has given SAI Group access to real stores in order to develop its deep learning, maximise accuracy, and eliminate false positives. As the items are scanned, the till or self-scan CCTV monitors the customer’s basket and point of sale and provides a dashboard of all the items, highlighting those in red that have not been scanned for whatever reason.
Helen Wilde, the chief commercial officer for SAI Group, who described the concept as “moving retail beyond the barcode,” said, “Iceland has a very innovative attitude, is great to work with, and has been running the trial on the checkout and self-scan since last summer. This means that the system is learning in real store conditions. There is no synthetic data used. Also, because it is an agnostic technology, it simply informs that the barcode has not been scanned rather than apportioning a motive to it. It could be that there is a problem with the positioning of the barcode on the packaging, which we have seen on items such as some magazines, corrugated egg boxes, or cucumbers, which leads to another conversation with the supplier or manufacturer.”
She said it could also be linked to heat-of-the-moment decisions when faced with a long queue and frustrated customers. When items have not scanned, the cashiers have simply put the items through, rather than it being anything linked to criminality.
The management information system captures the entire CCTV journey in video clip form, including the footage from self-scan checkouts.
“The system has learned in real time with real incidents,” said Helen who used to work for NCR and helped introduce self-scan systems into the UK. “The system captures the whole process, so the camera sees everything in the basket or trolley. If someone on self-scan finishes and pays for half a basket, the camera detects the unpaid-for items and raises an alert because that is what it is has been trained to do. It is agnostic, non-judgemental, and does not profile customers, but it does highlight exceptions to behaviour it has learned as the norm.”
As the system has learned, it also identifies product differences, a loophole that many self-scan abusers have used to reduce their bills and even promotions. Helen continued, “It is a mix of AI and machine vision working alongside human intervention to overcome challenges and develop a platform that then runs in store automatically. There was one promotion for sushi which included free soy sauce and chop sticks, but the system originally identified three items and alerted missed scans for the soy and chop sticks. So machine learning is not the whole story. The system was then trained to understand this situation.”
Duncan Miles, head of LP at Iceland, said, “The trial has taken longer than we thought because of COVID, but we have seen the solution in action at our staff store at head office. We then went into a low-footfall store to test proof of concept. As there [were] a number of visits to the store, the staff were aware we were implementing something, and we had no false scans. We therefore sent in LP staff to carry out false transactions, and all were picked up by the technology. We trialled in two high-footfall stores, and in both we have identified non-scanning and taken action with the results. We have installed in another four stores and are monitoring the results. We are playing the long game on this before it is rolled out further.” Iceland is also looking at the same SAI technology with cameras being used in the wider store to identify not only suspicious behaviour but also out-of-stock items.
AI technology may be about to say “goodnight, sweetheart” to the age-old retail conundrum of malicious versus non-malicious loss. But internal theft in its multiple guises is likely to be around for as long as there is opportunity and motivation. The well-documented kinds of motivation prevalent in news headlines, such as need versus greed, and external factors, such as the pandemic, may continue to cast a long and dark shadow over the high street for many years to come.