8 Retail Fraud Schemes to Avoid

Fraudsters have made the job of retail loss prevention and asset protection executives exponentially more difficult. Keeping up with the tactics used by bad actors to exploit retailers and consumers alike has evolved into a non-stop challenge, with some of the most frequent cons including gift card scams, sophisticated account takeovers and money laundering.

The National Retail Federation asked three retailers — Claire Rushton, senior director, global investigations and crimes against the business at Walmart; Jennifer Dayys, senior manager fraud and ORC investigations at Signet Jewelers; and Ryan Themm, corporate investigations manager at Meijer — to share some fraud schemes they’re currently battling.

Gift card fraud and money laundering

Criminals are draining gift card balances before customers even get a chance to use them. This often goes unnoticed until the recipient tries to redeem the card — sometimes months later. Law enforcement, through Project Red Hook, is actively targeting these operations.

Ghost tap and tap-to-pay scams

Stolen credit card data is funneled into illicit digital wallets (often sourced from overseas) and used to buy gift cards in bulk. These cards are then used to purchase goods for resale or returned for cash.

Victim-assisted scams

Organized groups — sometimes involving women and children — are convincing customers to make large purchases (often baby formula or health/beauty items). These items are later returned for cash. Some of these groups are traveling across the United States and may be linked to organized crime.

Phishing, smishing and consumer fraud

Fraudsters are impersonating legitimate organizations via phone, text or email to trick consumers and employees into sending money or gift cards. Common ruses include fake toll fines, overdue bills or goodwill requests. Payment methods include gift cards, bitcoin, money transfers and cash.

Returns abuse

Bad actors are gaming the returns process by claiming items never arrived and sometimes returning counterfeit or swapped items (e.g., replacing a product with a rock). This not only hurts inventory but could also drive up prices for everyone.

Quick change scams

These scammers use distraction and sleight of hand during cash transactions — especially in jewelry departments. They often display large amounts of cash, engage employees for 30 to 45 minutes, repeatedly count and exchange money to confuse staff — then walk away having paid only half the amount.

Online account takeovers

Fraudsters gain access to customer accounts and place buy online, pick up in-store orders. They then impersonate the customer to collect the goods in person, using fake IDs and order confirmations.

Manually keyed card fraud

When digital payments fail, scammers request to manually enter stolen card information. These transactions often result in chargebacks due to the lack of card presence, leaving retailers to absorb the loss.

Source: National Retail Federation. Top image by Tima Miroshnichenko via Pexels.