Preventing Employee Fraud in Retail: A Key Element of Loss Prevention

Employee theft represents a major challenge for retailers, with considerable financial consequences that continue to worsen. According to the Retail Council of Canada (RCC), total losses related to theft and shrinkage reached 9.1 billion dollars in 2024, nearly double the 5 billion recorded in 2018. Internal theft by employees remains a significant component of these losses, contributing to the 1.5% of total retail sales that shrink now represents in Canada. In Quebec, the Conseil québécois du commerce de détail (CQCD) also observes a concerning trend: the share of stolen merchandise relative to total sales increased from 0.7% in 2021 to 1% in 2023. Faced with this escalation, which is accompanied by a marked increase in violence during theft incidents, it becomes imperative for retail businesses to implement effective and proactive loss prevention strategies.

Understanding employee fraud

Employee fraud refers to any dishonest activity committed by an employee with the aim of gaining personal benefits at the expense of the company. This can include theft of money or merchandise, false expense claims, or misappropriation of resources. Such actions are often driven by opportunity, financial pressure, or a lack of professional ethics.

Effective prevention strategies

Ensuring employee integrity

Fraud prevention starts with establishing and communicating clear policies regarding fraud and a zero-tolerance approach at all levels of the company. Additionally, preventive measures such as random integrity visits are recommended to ensure employees’ honesty and compliance with internal policies.

Implementing robust controls

To reduce the risk of fraud, it is essential to conduct a loss prevention audit to assess your existing internal controls. This audit will recommend and help implement corrective measures, both operationally and financially. By doing so, you will strengthen your security measures and minimize the risk of losses.

Consistent year-round prevention

We recommend implementing monthly actions to effectively prevent losses, such as mystery shopper visits, closing-hour inspections, and operational audits. These measures help quickly detect irregularities and discourage fraudulent behaviors.

Training and raising employee awareness

Your employees are the first line of defense against internal theft. Therefore, it is crucial to train them on the risks of fraud and the procedures to follow in case of suspected dishonest behavior. By raising their awareness, you increase their vigilance and cooperation.

Encouraging anonymous reporting

Once employees are made aware of fraud prevention, it is helpful to establish an anonymous whistleblower system, either online or via phone, so they can report suspicious behaviors without fear of retaliation. This practice not only helps identify potential fraudsters quickly but also strengthens the trust and engagement of honest employees.

“GardaWorld Security's loss prevention services have implemented and manage a whistleblower platform for a major lingerie group. This solution has quickly helped prevent fraudulent activities and reinforced employee integrity within the organization”, mentioned Marc-Andre Plaisance, Director of Loss Prevention at GardaWorld Security.

Ensuring the effectiveness of security systems

To prevent losses, it is essential to ensure the effectiveness of your security systems, such as surveillance cameras. However, it goes beyond simply installing these devices; regular checks and repositioning evaluations are critical to ensure they function optimally to detect suspicious behaviors, explains Marc-Andre Plaisance.

Conclusion

By adopting proactive measures and strengthening internal controls, you can limit the risk of fraud, protect your assets, and maintain a healthy work environment.

For more information about our loss prevention services, contact our experts.