Organized retail crime or ORC, for short, has been a scourge upon the retail industry for many years. According to the National Retail Federation’s (NRF) 2016 Organized Retail Crime Survey, 83 percent of merchants polled reported that they had seen an increase in ORC activity within the past year. Perhaps more shockingly, 100 percent of senior loss prevention executives surveyed said their companies had experienced ORC in the past year, marking the first time in the study’s 12-year history that all responding companies reported being a victim of the crime. The average loss due to ORC also increased from nearly $454,000 per $1 billion in sales in 2015 to just over $700,000 in 2016.
Despite efforts by law enforcement to raise awareness about the severity of the issue and the introduction of legislation in many states to stiffen the penalties for those found guilty of participating in these highly-sophisticated theft rings, the NRF’s most recent research would suggest that things have never been better for the criminals. However, there are a number of individuals who have dedicated their careers to curbing ORC and the impact that it is has on retailers and consumers alike. One of those people is Christopher J. McGourty, the founder and executive director of the National Anti-Organized Retail Crime Association (NAORCA). The organization, which does business today as NAORCA Worldwide, provides a variety of services to retailers to help them combat theft and fraud within their stores.
McGourty, who has over 29 years of experience in the retail loss prevention and consulting industry, began his career as a store detective for Filene’s Basement where he later became the company’s senior corporate investigator. His career has also included stints with WetSeal & Contempo Casuals where he was a regional director (Northeast and Midwest) and nine years as the ORC national taskforce investigator and ORC trainer for TJX, the company that owns such well-known retailers as TJ Maxx, Marshalls and HomeGoods. In this “At the Frontline” interview, McGourty discusses the origins of NAORCA Worldwide and the trends he’s seeing relative to ORC in the U.S. today.
SecurityInfoWatch.com (SIW): How did your organization, NAORCA Worldwide, come to be founded?
McGourty: My role on the national taskforce at TJX focused on external theft… and I was investigating all kinds of external fraud – check fraud, credit card fraud and really anything that would affect the company on an external basis. We had some really big cases of credit card fraud and people manipulating receipts and it was just amazing to me the amount of people who were really taking part in conducting fraud on the outside. It was pretty eye-opening.
When I got downsized from TJX, I felt like I wanted to do more and I didn’t think that would be the end of my career investigating organized retail crime because I wanted to expose and promote awareness about what was truly going on in the field and what we were seeing. The ORC stuff was always kind of behind the scenes and never really talked about much in terms of the impact it was having. A friend of mine had started a group on LinkedIn and I said, “Oh, I’ll do that too,” because I was thinking about starting a group on ORC but I never thought it would get as big as it did. I knew I needed to do more with this and seeing where someone had done something similar with a LinkedIn group and started their own company, that’s what I did; I spun the National Anti-Organized Retail Crime Association into my own company in Massachusetts in 2012.
SIW: ORC really got a lot of attention several years back from law enforcement and the FBI, in particular. Is the problem still being addressed with that same fervor today from both law enforcement and the retail industry?
McGourty: The federal government has really put it on the states to basically come up with legislation on their own. As we know, there is still no federal organized retail crime law in place that federal agents could utilize to tackle the ORC problem. We do have states laws (34 currently with ORC legislation on the books) but they are all worded and stated a little bit differently as to what they consider ORC and how they will prosecute it. There is a push but it seems to be coming more from state legislatures.
What’s interesting about it too is that in some states that have enacted ORC laws is they have turned around and increased the felony threshold because of inflation. Years ago in Massachusetts, if you stole $250 worth of product, it was considered a felony in the state. Now they have pushed that back. In some ways you’re tackling the problem by going after the organized groups but then again you’re making it harder for law enforcement to make cases against these people when they know they can steal a certain amount of product and keep it under that felony threshold.
SIW: How have ORC schemes evolved through the years and what are some of the popular tactics they’re employing today?
McGourty: Some of the schemes that I think have evolved are fake receipts. Those are more sophisticated and harder to detect. You have to know your receipts and your labels and how people are manipulating those. With computers today they can pretty much manipulate anything and they’re now stealing receipt tapes out of unattended registers. We had a problem at one of the stores I worked at where we had a layaway area and they were running into it and stealing the rolls of receipt tape which could then be manipulated and used for future fraudulent returns.
One of the biggest things that has evolved is credit card skimming. There is such an epidemic of it. You read it about in newspapers and online all the time about people being arrested for skimming credit cards at gas stations. What a lot people don’t understand is that when you have data breaches and these skimming devices being put on gas station pumps, those credit cards are eventually cloned and used in retail stores. Those stores then become victims of the whole scheme because the bad guys are using these stolen credit cards, which people will eventually say were stolen, to go on shopping sprees and the retailer will take a hit. The thieves then find an outlet – flea markets, pawn shops, online stores, etc. – and they bypass the whole system.
Gift card fraud is another one. With stolen credit cards they buy gift cards which they then sell online or they have a market to sell them somehow and make money. But I have to say police are getting better at detecting it.
SIW: What do you see as some of the biggest challenges for the retail industry moving forward in combatting ORC and how can they stay ahead of the criminals?
McGourty: Retail is tending to go more online and I think we need some more online training and awareness for security professionals that will be tackling this new era in the industry. We’re going to need to train people on artificial intelligence, data mining, and how to use and read big data to help identify trends. That’s the wave of the future.
There are so many transactions that are going on out there now. You need the help of computers and you need humans too. You can’t just rely on computers to detect trends.
One of the bigger trends right now is counterfeit money. I even recently reached out to a solution provider to see if they would be interested in joining our association because stores are in need of counterfeit cash detection machines. There’s so much counterfeit currency being used now because of some of the things we have done as an industry to help stop credit card fraud and other crimes, so now they’re printing their own money.
We have to be on top of these kinds of things and be proactive. But criminals are going to continue to evolve and we really need to stay on top of where they are moving or morphing into.
About the Author:
Joel Griffin is the Editor-in-Chief of SecurityInfoWatch.com and a veteran security journalist. You can reach him at [email protected].
