LP Magazine EU








retail environment

Retailers taking the fight to the proxy providers of Fraud as a Service

If the business alternative to ‘getting mad’ is ‘getting even’ in the face of industrial levels of organised theft and fraud, retailers are very much attempting to level the playing field when it comes to looking at alternative forms of restorative justice in a world of ever-challenged police resourcing.

Retail crime has always been seen as a poor relation to more prioritised crimes, but according to new figures from Victim Support many forces are even struggling to deal with more serious offences, with 22 out of 43 forces showing an average of a 28 per cent fall in responses to 999 call-outs, according to a Freedom of Information request from the charity.

This is in part the reason behind retailers using big data-driven solutions to identify organised criminal enterprises and the civil law to prosecute them in an economic climate where the cost-of-living crisis may see more people turn to ‘fraud as a service’ (FaaS) in an attempt to make ends meet.

FaaS providers have mushroomed in recent years as they openly use social media platforms to offer ‘too good to be true’ services such as full refunds on goods not provided or 'how to scam' guides, for a cut of the prize. 

Such deals may become increasingly attractive to JAM (just about managing) families who look to use this ‘proxy’ service in the mistaken belief – and there are many alternative truths circulating on the Internet - that it is a third party and not them who is crossing the line of legitimacy.

One prominent FaaS scam is returns label manipulation where scammers, working on behalf of those who have invested, order a usually high-value item which comes with a returns address label which they alter to a nearby address so that all but the original barcode is changed. However, instead of returning the high value item, a parcel, very often an empty jiffy bag or one filled with scrap paper or other items - is scanned back into the returns network.

The carrier delivers to the address on the label, however as the barcode information is connected to a different address - the correct one - the parcel tracking information will show that the parcel has been returned successfully to the retailer. 

The ‘customer’ then uses the successful return tracking information to claim a refund from the retailer as well as retaining the goods which they never returned. 

It never reaches its true destination, but it has been returned as far as the banks or payment platforms are concerned and this results in a chargeback to the original seller while in the complex omni-channel world the blame is focused elsewhere, often the courier company. 

But risk teams are now getting better at identifying issues, with merchants harnessing data and sophisticated tools which optimise customer experience and drive revenue as part of their fight against fraud, with forward-thinking LP teams farming the fraud prevention data to harvest rich risk intelligence.

Upsetting a legitimate customer is commercial suicide but empowered by big data and advanced intelligence tools, fraud prevention has become risk intelligence. Retailers are now trying to use this added firepower to optimise revenues and produce a positive profit and loss by, for example supporting convenient customer channels such as click-and-collect where identification and face-to-face verification are required which means less is ‘lost’ in the ether.

Civil Recovery

But, as mentioned, they are also using civil remedies to target the providers of FaaS. Fraud intelligence teams are using surveillance to build their evidence cases and even door-stepping the fraudsters to serve notice to quit on them. By taking down the FaaS providers and discrediting them on social media as, like legitimate businesses, they only get their profit by providing a service in the first instance, the retailer is cutting off the demand or ready market.

These providers are either criminally prosecuted if the retailer can use its extensive intelligence to convince a police force to take the case on or served a civil recovery notice using the same audit trail of evidence.

Nermina Webster, a solicitor and civil recovery expert at East Midlands-based Business Loss Prevention, said the solution is becoming a weapon of choice for fraud teams.

“Retailers have gone to great lengths to build evidence cases against these sophisticated fraudsters,” she said.

“They have a trail of exactly what happened including screen shots and written statements, but there is a lower threshold of proof.

“All they have to do is prove their case on the balance of probabilities rather than the criminal test of beyond reasonable doubt – it is much easier to get a result and a financial remedy for their losses.”

She said it was also a shorter process than pursuing a criminal prosecution which may not pass the stringent requirements of the CPS (Crown Prosecution Service).

“It is also fairer on all parties and allows for negotiation and arbitration to reach a resolution that satisfies all parties as well as helping to disrupt a kind of organised fraud that if left unattended as a result of limited police response or resource would result in greater losses,” she added. 

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