Case Study – Refund Fraud

INVESTIGATION STATUS

Mr. X’s resignation was accepted with immediate effect as a result of his admissions to performing fraudulent refunds for personal gain whereby he refunded stock, entered false details into the refund books and took money from the till totalling £3,000 over the last year. Mr. X was arrested on suspicion of obtaining money via deception. He subsequently pleaded guilty to 5 specimen counts of Theft, Employee, 5 counts of Deception and received a 12 month suspended sentence.

Allied Detectives received information (through the confidential hotline service set up for the client company) from the store management team, which suggested that Mr. X was performing fraudulent cash refunds. It had been noticed by management that Mr. X had been asking customers to fill in the refund books during exchanges and trade-ins. This implied that he was then performing illicit refund transactions and writing in the information on to the refund books where the customer had previously filled in their information. Refund pads were subsequently received by us that detailed some of the suspect refunds.

INTRODUCTION

An analysis of the refund book in comparison with a refund report showed that several cash refunds performed by Mr. X in the last couple of weeks had original receipt numbers written on the refund book, which were not compatible with the items being refunded. A comparison report run over the period of the last two stock takes indicated that Mr. X was the number 1 refunder over that period (43 weeks). This suggested that Mr. X might have been doing the same over a longer period than initially envisaged.

Appendix 1 is a refund report detailing all fraudulent refunds performed over the last couple of weeks by Mr. X.

Appendix 2 is a series of top copies of the refund book for Till 4 over the last couple of weeks.

INVESTIGATORY INTERVIEW

I interviewed Mr. X on Tuesday *th June 200* in the presence of the store manager who took contemporaneous notes of the interview. Full details of the investigatory interview can be seen in the notes accompanying this report. Below is a summary of the most salient points discussed in the interview.

Mr. X confirmed that he had been trained on all EiP folders and was fully signed off on them. He also described the refund procedures accurately and confirmed that he knew of no innocent explanation why the original receipt numbers would not match the items being refunded.

I asked Mr. X about two transactions (appendix 1 & 2) that occurred on the **/06/200* transaction T04-90*** (original receipt number T04-90***) where he refunded a GT4 PS2 (£32.99) and transaction T04-90*** where he refunded Area 51 PS2 (original receipt number T04-90***). I informed him that the original receipt numbers that did not match the items being refunded and asked him to explain. He replied that, “I could have got the numbers wrong as I have bad handwriting”. He also explained that he had been suffering from stress due to domestic problems.

I also asked Mr. X about a transaction (appendix 1 & 2) on the same day (appendix 1 & 2), **/06/200* Transaction number T04-904**, Ace Combat 5 PS2, and Mercenaries PS2 (total value £69.99). Again, this transaction’s original receipt number (T03-081***) did not match the items being refunded. He replied, “probably the same as last time”.

I read out a series of cash refund transactions (appendix 1 & 2) to that he had performed, which had original receipts numbers that did not match the items refunded and his general replies to that were that, he didn’t know/not paying attention/incompetence.

I subsequently adjourned the interview for a comfort break and resumed it about ten minutes later.

Upon recommencement of the interview, Mr. X decided to tell me the truth and informed me that he owed about £2k to some people who demanded their money back. Because of that, he started defrauding the company about a year ago. He claimed that he had taken approximately £1k during this time.

I challenged him over this figure, pointing out that he had performed approximately £300   £400 of illicit refunds over the last two weeks alone. Mr. X thought about it and re-estimated the amount as about £3000 over the past year.

CONCLUSION

Mr. X has exploited a weakness in the reconciliation method whereby, if the numbers of refunds entered into the book match the total refunds in the Daily X-read then no suspicions are raised. However, the level of refunds was such that a more astute manager would have grown aware of this fraud much sooner.

Mr. X’s resignation was accepted with immediate effect as a result of his admissions to performing fraudulent refunds for personal gain whereby he refunded stock, entered false details into the refund books and took money from the till totalling £3000 over the last year.

Mr. X was subsequently arrested on suspicion of obtaining money via deception. The Police have informed me that in the PACE interview under caution, Mr. X has confirmed the above amount and that he intends to plead guilty in court.

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