How big is insider fraud?

By Michael Lang

Insider fraud is present in all organisations, including major retailers on the high street. Accept it or prevent it, asks Panasonic’s Michael Lang.

For the last 10 years major security studies have highlighted clearly that insiders represent the biggest threat facing organisations.

The Price waterhouse Coopers' Information Security Breaches Survey 2010 reported that almost half of large companies in the UK (49 percent) suffered theft or fraud involving computers. According to Verizon's 2010 Data Breach Investigations Report insiders were involved in 48 percent of all breaches - up from 26 percent the previous year. A recent report from KPMG found that the frequency of 'malicious insider' incidents had increased from 4 percent in 2007 to 21 percent in 2010.

The economic downturn may be partly responsible for the heightened insider threat, or it could be that companies are becoming more successful in identifying the constantly evolving attack methods used by organised criminals.

One sector where the threat at least remains relatively static is in traditional retail on the high street. However, this is also a sector that is in for a tough time, certainly in the first half of 2011.

Shrinkage within the retail sector runs in to billions of euros every year against an economic backdrop of reduced consumer spend and ever increasing pressure on margins through reduced sales and increasing costs.

A recent survey of European retail losses conducted by the Centre for Retail Research found that staff shrinkage in the UK is the highest in Europe, accounting for 36.8 per cent of retail losses. The European average is 29.8 per cent of retail losses caused by employees' dishonesty. In retail, as in other sectors, insider fraud is big business.           

Employee theft includes theft of cash, theft of receipts (used later for returns by accomplices), void transactions (pocketing the cash after a customer has paid), overcharging, short‐changing, false discounting, coupon and voucher abuse, false refunds and returns, exchanging counterfeit goods for genuine items, and under‐ringing.

Around a quarter of retailers successfully manage shrinkage, or reduce it, even when it is otherwise increasing universally. Strong funding of loss prevention programmes with an innovative approach - including the early adoption of new technologies - are significant contributing factors in tackling the problem, along with screening of employees and staff education and training.

It is not always easy to predict the tactics that will be used by dishonest individuals. Applying technology that can analyse behaviour at the point of sale and alert retailers to fraudulent activities as they are occurring can enhance the effectiveness of loss prevention programmes. Monitoring, managing and educating staff via EPOS devices diminishes opportunities for theft - especially when the employees know that such fraud prevention measurements have been put into place.

The latest generation of retail activity management solutions, such as VigilancePro Retail, link activity on EPOS devices with CCTV (such as those provided by Panasonic) enabling synchronised playback of the till screen and associated camera footage. An irrefutable audit trail of activity at all payment points is created that can be analysed in real-time or over time to identify unusual trading patterns.

A solution that is able to analyse all EPOS till activity linked not only to the value and content of transactions but also contexts in terms of time, and time taken has additional benefits.

One of these benefits is not related to loss prevention put instead provides a retailer with the ability to optimise business performance, customer experience and employee rewards. The intelligence provided from these solutions can provide an insight into staff productivity and performance - reporting on metrics such as average time to serve and average sales value - highlighting exceptional performance or identifying individual training needs.

With consumer spending expected to drop this year, reduced revenue will increase the pressure on crime prevention and detection staff to achieve more with fewer resources. Sophisticated technology such as VigilancePro Retail, which leverages existing investments in physical security systems such as CCTV and EAS (electronic article surveillance), is one way in which Profit Protection teams can achieve more with less. Reducing shrinkage and improving productivity deliver a double impact directly to the bottom line. Panasonic can support organisations combat insider fraud through innovative systems solutions such as the implementation and deployment of VigilancePro Retail.

About

Michael Lang is General Manager, System Integration at Panasonic Systems Networks Europe. With over 90 years of innovation Panasonic offers customised, scalable solutions that are reliable, flexible and affordable.