Employee Gift Card Fraud Growing Sharply

NEW YORK -- Gift cards are easy for dishonest employees to exploit, according to a report in The New York Times.

"Gift card fraud is spiking," said Joshua Bamfield, author of the Global Retail Theft Barometer, an annual international survey of retailers. "To employees, this is like currency. It's almost as good as the U.S. dollar."

The Times reported that a 23-year-old sales clerk at Saks' flagship store in Manhattan was caught recently ringing up $130,000 in false merchandise returns and siphoning the money onto a gift card.

Employee fraud involving gift cards appears to be growing sharply along with overall theft, now estimated at $36 billion a year in the industry, or 1.51 percent of retail sales, according to a leading national study. As total sales have been falling, employee theft and shoplifting have been rising across the United States, industry experts say, with occasional arrests making headlines like the Saks clerk cited by the Times.

The report described many of the gift card crimes as straightforward, usually involving young sales clerks and smaller amounts than the Saks theft. Among the variations: cashiers who do fake refunds of merchandise and then, with the amount refunded, use their registers to electronically fill gift cards, which they take, or cashiers who give blank gift cards to shoppers and then divert the shoppers' money onto cards for themselves.

Retailers can only estimate what portion of their theft losses can be traced to employees, compared to shoplifting and vendors, but they view their own store workers as the leading culprits. The 2008 National Retail Security Survey based on information obtained from 106 retail chains that responded to a questionnaire, said employees were responsible for 43 percent of the stores' unexplained losses, vs. 36 percent for shoplifting.

Employee theft rose slightly that year to $15.5 billion.
Casey Chroust, executive vice president for retail operations at the Retail Industry Leaders Association, told the Times organized crime contributes to the theft problem. Criminals often pressure or pay retail employees to slip them gift cards or tell them when and where security guards are patrolling, according to Chroust.
Another retail theft specialist said that gift cards are harder to track than a stolen credit card because they don't require the user to show identification when purchasing with it.

In addition, the online marketplace, like eBay, provides thieves with fraudulently obtained gift cards an outlet to sell them, prompting some retailers to hire loss-prevention specialists who monitor online auctions of gift cards to find thieves (eBay now bars sellers from auctioning cards more than $500 in value or more than one gift card a week), according to the Times report.

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