As the quick-service restaurant (QSR) industry continues to evolve, so do the methods of internal employee theft. With the rise of digital payments and the decline of cash transactions, we’re seeing new and sophisticated theft schemes emerge—especially around credit cards. While cash theft remains a concern, these new credit card tactics can be more difficult to detect, leaving both customers and employers at risk.
Emerging Employee Theft: Credit Card Scams
Gone are the days of stuffing cash into pockets. As payment systems evolve, so do the methods of exploitation by dishonest employees. With the prevalence of mobile apps, point-of-sale (POS) systems, and digital payment methods, employees now have more opportunities to divert funds from unsuspecting customers and their employers.
Below are some common credit card fraud schemes emerging in the QSR industry:
1. The Refund Scam
Summary:
Employees issue refunds to their own accounts, either by directly swiping their personal card or using stored card information on their phones.
Explanation:
This involves creating a fake refund transaction in the POS system and directing the funds to their personal account. The employee might swipe their card directly at the POS terminal or use a mobile payment app that allows them to process payments using stored card information.
Recommended Solutions:
- Set Up Exception Alerts: If you’re using tools like Envysion’s Exception Reporting, set up alerts for high refund, void, or discount activity so you can quickly spot and address any suspicious behavior.
- Use Certified Auditors: Let auditors keep an eye on transaction patterns, helping you catch anything unusual and provide you with verified incidents for follow-up.
2. The “Mobile Payment” Scam
Summary:
Employees use a mobile payment app to divert funds to their own accounts from customers’ credit cards instead of tendering the customer’s order.
Explanation:
The employee rings up a transaction for the customer, but instead of using the POS terminal, they swipe or tap the customer’s card on their phone where a mobile POS application is already installed and an account is set up to mimic the name of the restaurant. The customer is charged the correct amount, but the funds go to the employee’s account. The employee then voids or discounts the transaction in the POS system, leaving the customer none the wiser because if the customer looks at their account, they’ll see a withdrawal for the transaction amount from a business that sounds like the restaurant they were at.
Recommended Solutions:
- Review Cell Phone Policies: Review your cell phone policy with employees, making sure they understand where and when it’s appropriate to use their phones while working.
- Perform Random Spot Audits: Once a week use video and transaction data to identify and address inconsistencies by watching the recording of high dollar voids or refunds.
3. The “Card Skimming” Threat
Summary:
Employees use skimming devices or their phones to steal customer card information, allowing them to make unauthorized purchases.
Explanation:
This scenario involves attaching a skimming device to the POS terminal, which captures card information when customers swipe their cards. The employee then uses this information to make fraudulent purchases or sell it to others.
Ask any person to show you their phone today and it will undoubtedly have a camera included or have “wallet” software installed. With a couple clicks of the camera button, card information can be saved as photos or as a digital card within the wallet software allowing the employees to make fraudulent purchases later on.
Recommended Solutions:
- Inspect Hardware Regularly: Every shift, inspect your card readers and POS terminals. Look for anything suspicious, like USB devices attached to the terminals, damaged mounts connecting card readers to counters, obstructive covers, or wear and tear around the areas where cards come in contact with the reader. Report any suspicious findings to IT and Loss Prevention.
- Educate Employees: Theft thrives when it’s ignored. Encourage your team to speak up if they notice anything suspicious, and remind them that staying vigilant helps protect everyone.
Steps to Protect Your Business This Holiday Season
As we approach the busy holiday season, it’s important to be proactive in protecting your business from these emerging threats. Here are some steps that can help mitigate the risks:
Hardware Checks: Regularly inspect your POS terminals and card readers at the start of each shift. Look for anything unusual, such as USB devices attached to terminals or any signs of tampering. Any suspicious findings should be reported immediately to IT or loss prevention teams.
Cell Phone Policy Review: While it’s unrealistic to expect employees to never use their phones during shifts, it’s essential to remind them of the policies surrounding their use in the workplace. Reinforce where and when it’s appropriate for phones to be used, and the risks associated with mobile payment scams.
See Something, Say Something: Encourage employees to report suspicious activity. Credit card fraud can go unnoticed unless employees are vigilant and speak up when they notice red flags.
Set Up Exception Alerts: If your business uses exception reporting or business intelligence tools, configure alerts for high refund, void, or discount activity. By monitoring these metrics closely, you can quickly detect irregularities and address potential credit card fraud.
Use Certified Auditors: Think of certified auditors as your extra set of eyes, keeping watch so you don’t have to. They dig into video and transaction data to spot things like employee theft, credit card fraud, or other issues that might slip through the cracks. When they find something, you’ll get all the details—complete with footage—so you can tackle the problem and keep things running smoothly.
Stay Ahead of Emerging Employee Theft Trends
The holiday season often brings added stress, increasing the risk of employee fraud. By staying informed, vigilant, and implementing strong systems and policies, you can mitigate employee theft, protect your customers and business, and navigate the season with confidence.
As the Industry Leader for Managed Video and Loss Prevention, we’re here to help you protect your business and stay one step ahead of evolving challenges. With our advanced video solutions and exception reporting tools, you can quickly uncover and address fraudulent activity and employee theft before it becomes a bigger issue.