Small Business Crime Prevention
Crime – burglary, robbery, vandalism, shoplifting, employee theft, and fraud – costs businesses billions of dollars each year. Crime can be particularly devastating to small businesses who lose both customers and employees when crime and fear claim a neighborhood. When small businesses are victims of crime, they often react by changing their hours of operation, raising their prices to cover their losses, relocating outside the community, or simply closing. Fear of crime isolates businesses, much like fear isolates individuals – and this isolation increases vulnerability to crime.
Helping small businesses reduce and prevent crime must be a community effort. Law enforcement can work with owners to improve security and design their spaces to reduce risk. Small businesses can join together in such efforts as Business Watch to alert each other to crime patterns and suspicious activities. They can help young people in the community learn job-seeking skills and give them jobs when possible.
Finally, businesses must reach out to others – law enforcement, civic groups, schools, churches, youth groups – to fight violence, drugs, and other crime and create a safer community for all.
Laying the Foundation
Take a hard look at the business — its physical layout, employees, hiring practices, and overall security. Assess its vulnerability to all kinds of crime, from burglary to embezzlement. Some basic prevention principles include:
- Provide training for all employees, including cleaning staff, so they are familiar with security procedures and know your expectations.
- Use good locks, safes, and alarm systems. If you have questions, seek the help of law enforcement.
- Keep detailed, up-to-date records. Store back-up copies off the premises. If you are ever victimized, you can assess losses more easily and provide useful information for law enforcement investigations.
- Establish and enforce clear policies about employee theft, employee substance abuse, crime reporting, opening and closing the business, and other security procedures.
- Mark equipment — registers, adding machines, calculators, computers, typewriters — with an identification number (for example, tax identification or license number). Post the Operation Identification warning sticker in your store-front window. Keep a record of all identification numbers off the premises with other important records.
- Consider the cost of each security improvement you make against the potential savings through loss reduction. Remember to assess the impact on employees and customers.
- Make sure all outside entrances and inside security doors have deadbolt locks. If you use padlocks, they should be made of steel and kept locked at all times. Remember to remove serial numbers from your locks to prevent unauthorized keys from being made.
- All outside or security doors should be metal-lined and secured with metal security crossbars. Pin all exposed hinges to prevent removal.
- Windows should have secure locks and burglar-resistant glass. Consider installing metal grates on all your windows except display windows. Remove all expensive items from window displays at night and make sure you can see easily into your business after closing.
- Light the inside and outside of your business, especially around doors, windows, skylights, or other entry points. Consider installing covers over exterior lights and power sources to deter tampering.
- Check the parking lot for good lighting and unobstructed views.
- Keep your cash register in plain view from the outside of your business so it can be monitored by police during the day or at night. Leave it open and empty after closing.
- Be sure your safe is fireproof and securely anchored. It should be kept in plain view. Leave it open when it’s empty, use it to lock up valuables when you close. Remember to change the combination when an employee who has had access to it leaves your business.
- Before you invest in an alarm system, check with several companies and decide what level of security fits your needs. Learn how to use your system properly. Check the system daily and run a test when closing.
Robbery doesn’t occur as often as other crimes against businesses, but the potential for loss can be much greater from a single incident. Also, robbery involves force or threat of force and can result in serious injury or death.
- Greet every person who enters the business in a friendly manner. Personal contact can discourage a would-be criminal.
- Keep windows clear of displays or signs and make sure your business is well-lighted. Check the layout of your store; eliminate any blind spots that may hide a robbery in progress.
- Provide information about your security system to employees only on a “need-to-know” basis. Instruct your employees to report any suspicious activity or person immediately and write down the information for future reference.
- Place cash registers in the front section of the store. This increases the chances of someone spotting a robbery in progress and reporting it to the police.
- Keep small amounts of cash in the register to reduce losses. Use a drop safe into which large bills and excess cash are dropped by employees and cannot be retrieved by them. Post signs alerting would-be robbers of this procedure.
- Make bank deposits often and during business hours. Don’t establish a pattern; take different routes at different times during the day. Ask a police officer to escort you to the bank whenever possible.
- Make sure your address is visible so emergency vehicles can easily find your business.
- If you or your employees are confronted by a robber, cooperate. Merchandise and cash can always be replaced — people can’t!
Credit Card Fraud
- Train employees to follow each credit card company’s authorization procedures.
- Be skeptical of a customer with only one credit card and one piece of identification.
- Be aware of the customer who makes several small purchases by check or credit card that are under the amount for manager approval.
- Is the item being purchased one that could be easily fenced for cash? (Examples include televisions, stereos, cameras, and other portable items.)
- If you are suspicious of the purchaser, make a note of appearance, companions, any vehicle used, and identification presented. Call the police department.
- Look for “ghost” numbers or letters. Many times criminals will change the numbers and/or name on a stolen card. To do this they either melt the original name and numbers off or file them off. Both of these processes can leave faint imprints of the original characters.
- Examine the signature strip on the credit card. A criminal may cover the real card owner’s signature with “White-Out” and sign it on the new strip.
- Check to see if the signature on the card compares favorably with the signature on the sales slip.
(Source: Credit Card and Computer Fraud, published by the Department of the Treasury, United States Secret Service.)
One of the fastest growing and most lucrative schemes involves telemarketers who target commercial establishments and never actually come face-to-face with their victims. These fraudsters have taken a very simple scheme, with low overhead costs and minimal risk of prosecution, and turned it into one of the most lucrative con games operating today. It’s known as a “Business-to-Business Fraud.” The principal object of this fraud scheme is to cause victim companies to pay exorbitant prices for merchandise and/or to cause the victim companies to pay for merchandise that was never ordered.
Businesses and corporations deal with a variety of suppliers for purchases of office supplies, copy machine paper, fax paper, and other products regularly used by employees to carry out their duties. Often many employees are involved in the process of purchasing supplies and are unaware of procedures used to keep supplies in stock. By failing to establish proper procedures and strict accounting methods, large and small business often fall prey to fraudulent office supply dealers. If the fraud is detected, it is often “written off” as “caveat emptor” (buyer beware), a poor business decision by a lower level corporate employee. Seldom is there any notification to law enforcement and as a direct result little potential for criminal prosecution.
Most recently the FBI, IRS, and the United States Postal Inspection Service in Philadelphia initiated several investigations into the activities of local “business-to-business” telemarketing fraud operations. The first investigation involved two subjects, who over a two-year period were involved in more that $900,000 in fraudulent billings to small business nationwide. The second investigation involves one large national firm that lost more than $400,000 in less than 12 months to a single fraudulent office supply dealer, and finally a third investigation which involved mass mailing of fraudulent invoices, of less than a $1,000 each, to businesses across the country. In this third case, the mass mailing were costing the subject up to $40,000 per mailing for envelopes, invoices and postage, but he was receiving hundreds of thousands of dollars in returns from companies paying for a product they had never requested. From these investigations we have attempted to outline the general scheme employed.
THE SCHEME: The subjects establish a telemarketing center, calling nursing homes, churches, hotels, schools, hospitals and others.
- Telephone solicitations are directed to purchasing agents as well as maintenance personnel and equivalent employees without purchasing authority at the victim company.
- Predetermined sales solicitations are used that misrepresent to the victim company that the telemarketing firm has done business with them in the past. Often the subjects adopt the name of a large legitimate office supply company.
- The Telemarketer misrepresents or conceals material facts concerning the price of the merchandise, and often make misrepresentations on the quality ordered and the characteristics of the merchandise. In many instances the product offered is represented as a free sample, but subsequently invoiced to the victim.
- The invoiced merchandise ordered by the victim companies is billed at an extraordinarily high cost. An example, the victim is billed $252 for six rolls of duct tape, actual market value $25. If the over billing is detected, the subjects claim it is a billing error and adjust the price to $28.50 for six rolls.
- The subjects as part of the scheme fail to provide a shipping invoice or shipping order with the product which would identify the extraordinarily high cost of the product at the time of receipt.
- The subjects ship products by United Parcel Service, utilizing a post office box return address for the telemarketing business, knowing that United Parcel Service will only return merchandise to a street address.
- The subjects typically offer “prizes” in an effort to cleverly get unauthorized employees to order supplies. The prize offer is actually a form of a bribe or “kickbacks” to employees at the victim companies and can be held over the head of the unwitting employee if payment is not received or to continue to order products, despite the extraordinarily high prices charged to the victim companies.
- The subjects will coerce certain reluctant victim company employees to approve payments for the over priced products. Threatening to tell their supervisors of the employee’s acceptance of “kickbacks” or “prizes.”
- As part of the scheme once a victim company is on the hook the subjects repeatedly make sales pushing prices up.
Warning Signs of Business-to-Business Fraud
- Beware of COLD CALLS requesting verification of type and serial numbers of office equipment.
- CALLS REQUESTING VERIFICATION of the name of the office manager or receptionist. Such calls are usually a ploy to obtain a contact name within the company so that the fraudulent operator can send the unordered product to an employee.
- UNSOLICITED SALES CALLS with claims of lower than market prices on office equipment and supplies.
Tips For Businesses
- VERIFY to whom you are speaking on the telephone. Ask for the person’s name, phone number, company name and address. Never accept a Post Office Box as an address.
- CHECK YOUR OWN SUPPLIER LIST to determine if the caller is listed as a source for office supplies and if the address matches the one given by the telemarketer.
- Check out the company’s REPUTATION with the Better Business Bureau in the city where the solicitations originates before you place an order.
Annual damage estimates are in the billions; businesses pass these costs of vandalism on to customers through higher prices. Most vandals are young people – from grade-schoolers to teens to young adults.
- Clean up vandalism as soon as it happens — replace signs, repair equipment, paint over graffiti. Once the graffiti is gone, use landscape designs (such as prickly shrubs or closely planted hedges), building materials (such as hard-to-mark surfaces), lighting, or fences to discourage vandals.
- If you see someone vandalizing a property, report it to the police. Remember, vandalism is a crime.
- Protect your business by installing and using good lighting and locking gates. Eliminate places where someone might hide, such as trees, shrubbery, stairwells, and alleys.
- Have a community meeting on vandalism to discuss its victims, costs, and solutions. Include young people in all vandalism prevention efforts.
Businesses lose billions of dollars each year to shoplifting, and then often must pass this loss on to the customers through higher prices.
- Train employees in how to reduce opportunities for shoplifting and how to apprehend shoplifters. Work with law enforcement to teach employees what actions may signal shoplifting.
- Keep the store neat and orderly. Use mirrors to eliminate “blind spots” in corners that might hide shoplifters. Merchandise should be kept away from store exits to prevent grab-and-run situations.
- Keep displays full and orderly, so employees can see at a glance if something is missing. Keep expensive merchandise in locked cases. Limit the number of items employees remove at any one time for customers to examine.
- Design the exits of the business so all persons must pass by security personnel or store employees. You may want to use an electronic article surveillance system or other inventory control device.
- The cash register should be inaccessible to customers, locked, and monitored at all times. Place it near the front of the store so employees can monitor customers coming and going.
- Dressing rooms and restrooms should be watched at all times. Keep dressing rooms locked and limit the number of items taken in.
Many fraudulent checks are visibly phony. By paying close attention to a check’s appearance, you can often detect a possible bad check before accepting it as payment. When you see one or more of the following telltale signs, you may be looking at a phony check. Protect yourself against possible losses by requiring management approval of the check or asking for an alternative form of payment.
- No perforation on check edges.
- Apparently altered writing or erasures.
- Water spots or alterations of check’s color or graphic background.
- Numbered under 500 (new account).
- Glossy rather than dull finish of magnetic ink.
- Signature does not match imprinted name and ID.
Employee Theft Prevention
Employee theft accounts for a large amount of business losses.
- Establish a written policy that outlines employee responsibilities, standards of honesty, and general security procedures and consequences for not following them. Make sure new employees read it, understand it, and sign it as a condition of employment.
- Follow strict hiring practices. Verify all information and contact all the references listed on an application. Consider running a credit check.
- Keep accurate records on cash flow, inventory, equipment, and supplies. Have it checked regularly by someone other than the person responsible for maintaining it.
- Limit access to keys, the safe, computerized records, and alarm codes, and engrave “DO NOT DUPLICATE” on store keys. Change locks and access codes when an employee is terminated.
- If internal theft is discovered, take action quickly. Contact your local law enforcement agency and be sure to send a message to your employees that theft will not be tolerated.
Reward employees for uncovering security problems and for doing a good job.