Shoplifters are fueling a financial crime wave. Can fintech fight back? | PaymentsSource

Shoplifters are fueling a financial crime wave. Can fintech fight back? | PaymentsSource

NEW YORK — A New Yorker cartoon from 2006 depicts a criminal robbing a bank at gunpoint. The teller says: “You know, you can do this just as easily online.”

In 2023, criminals are no longer swayed by that argument, at least in the case of organized retail crime. 

“The post-COVID era of retail crime has changed the landscape. Today’s criminals are much more brazen than they have been in the past,” said Millie Kresevich, senior director of asset protection at the global eyewear seller EssilorLuxottica, in a panel discussion at the National Retail Federation’s Big Show this week in New York. 

Thieves are sweeping store shelves and confronting employees, she said. Some stores are using checkout technology to put a lid on their losses, but overall these organized crime groups are responsible for not only the store-by-store thefts but also billions of dollars of financial crime. 

Ray Ban (EssilorLuxottica)
EssilroLuxottica, maker of Ray-Ban sunglasses and other eyewear, is speaking out against the increasingly brazen nature of organized retail crime.

Taylor Weidman/Bloomberg

“One of our main priorities is financial crimes, and with that comes other crimes that these organized retail criminal organizations are doing,” said Maria Michel-Manzo, division chief for the Countering Transnational Organized Crime, Financial and Fraud division of the U.S. Department of Homeland Security.

In 2019, almost $70 billion of retailer losses were funneled through U.S. financial institutions, “and that’s money that we want to go after,” she said. 

In one example where retail products were stolen en masse, criminals stored them in warehouses where people spent all day removing the retailer markings before those products were moved on for reselling or other illicit use. The same group was likely involved in human trafficking and weapon smuggling, Michel-Manzo said.

The issue of organized crime won’t be solved at the individual retailer level, but new payment technology could hinder small-scale thieves.

Store-level security

Checkout-free models like Amazon’s Just Walk Out track customers from the moment they walk into a store, so a retailer such as Amazon Go knows what each individual is carrying with them — even if the shopper tries to subvert the system that charges them for that item.

Verizon has taken a stake in AiFi, a company that offers a competing checkout-free system, and theft reduction is a part of the benefit, according to James Hughes, managing principal for Verizon Enterprise Solutions. 

Aldi, a European supermarket chain that works with AiFi, saw shrinkage reduce after deploying AiFi’s technology, Hughes said in an interview.

“Because you’re being recorded all the time, it’s harder to put stuff in your pocket,” Hughes said. At Aldi, “they saw shrinkage reduce quite significantly,” despite a broader trend of shrinkage rising across the retail industry, he said.

If a store didn’t want to eliminate the checkout entirely, it could still use the AiFi technology to spot instances of shoplifting and potentially crack down, Hughes said. 

The cashierless portion is indeed optional, according to Mike Webster, general manager and senior vice president of Oracle Retail.

Amazon Go and similar models “to me, represents more process innovation, certainly not a technology innovation,” Webster said in an interview. “After spending a little bit of my life in the self-checkout space, I can assure you that the same tricks work” in both settings, he said. 

Banding together

EssilorLuxottica’s Kresevich emphasized that the problem is much bigger than what can be solved by individual stores spending on security.

“Gone are the days of just concealing property when they’re in the stores,” she said. “Today’s criminals are … sweeping shelves and aggressively affecting employees while in stores, and it’s making it very difficult for retailers to protect stores because the cost is much more than it was in the past.”

Retailers will have more success working together than focusing on just their own losses, Kresevich said. She advised retailers to work with legislators and police, and to advocate for legislation that focuses on in-store theft and increases the penalties for the perpetrators. “We have to come together as a coalition,” she said. 

Adam Braun, executive deputy attorney general at the Illinois Attorney General’s Office, said many of these organized crime rings are savvy about existing laws, and know what they need to do to skirt detection or prosecution.

“When our office first began investigating these crimes, we were blown away by the sophistication of the organizers,” Braun said. “This was clearly not isolated instances of somebody stealing a particular item from a shelf.”

Organizers were staying below felony theft thresholds and spreading their crimes across jurisdictions, Braun said. One group could steal from stores in one county in the morning, then focus on another county in the afternoon and a third in the evening, knowing that the police in each jurisdiction would not be able to communicate fast enough to spot the pattern.

“The level of sophistication has gone up. The organized part, I think, is expanding,” Kresevich said. “So today’s orchestrators of these crimes, they know the commerce trade, they understand how to get the product from the store and then put it back into the system to be sold at large amounts.”

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