Chapter 5 – Organized Retail Crime

Organized Retail Crime (ORC) is a problem that is spreading and needs to be addressed on a micro and macro level. In recent years, ORC has become even more prevalent, affecting virtually every retail sector. Concurrent with this growth in ORC activity, the perpetrators of these crimes have become more aggressive, bold, and brazen.

So, what exactly is ORC?

The definition of ORC, according to the Loss Prevention Research Council, is “Predatory crimes in which one or more offenders knowingly and intentionally plan or coordinate criminal activities on one or more occasions with the intent of financially profiting themselves, a group, or a broader criminal enterprise with which they are associated through the acquisition of cash, other financial instruments, or merchandise that can be resold, returned, exchanged, or otherwise used to generate a profit.”

Homeland Security Investigations (HSI) defines ORC as “the association of two or more persons engaged in illegally obtaining items of value from retail establishments, through theft and/or fraud, as part of a criminal enterprise.”

ORC has become very sophisticated. It employs a market-specific infrastructure, wherein certain coveted products are targeted. After these products are targeted, “boosters” (or those enlisted to do the actual stealing) are recruited to acquire them through various means. These products can be stolen in a brick-and-mortar store, ordered online or in a store using fraudulent credit cards, or procured through cargo theft, which is undoubtedly the most consequential and costly method.

A 2022 survey conducted by the National Retail Federation found that these are the most common products stolen by ORC rings:

  • Apparel
    • Denim
    • Designer apparel
    • Activewear
    • Intimates
  • Electronics
    • Appliances
    • Charging cords
    • Smartphones
    • Headphones
    • Vacuums
  • Health and Beauty
    • Medication (Pharma)
    • Fragrances
    • Blades and razors
    • Cosmetics
    • Body wash
  • Accessories
    • Designer handbags
    • Fashion and fine jewelry
    • Belts
    • Watches
    • Designer sunglasses
    • Branded eyewear
  • Footwear
    • Men’s and women’s footwear
    • Athletic shoes and sneakers
    • Designer shoes
  • Home Furnishings
    • Bedding
    • Home goods
    • Housewares
    • High-end mirrors
  • Home Improvement
    • Power tools and equipment
    • Outdoor and seasonal tools
    • Wire
    • Shingles
  • Office Supplies
    • Ink cartridges
    • Printers
    • Toner
  • Food and Beverages
    • Meat
    • Seafood
    • Candy
    • Alcohol
    • Energy drinks
  • Children’s Items
    • Infant formula
    • Infant and toddler items
    • Children’s toys
  • Other
    • Detergent
    • Tobacco
    • Pet Medication
    • Travel items
    • Physical and electronic gift cards

In many cases, these items are sold in online marketplaces, or OM’s. These OM’s have become virtual storefronts for perpetrators in ORC, avenues for liquidating stolen items and turning them into cash. Some examples of Online Marketplaces are:

  • Amazon
  • Facebook
  • eBay
  • Etsy
  • Craigslist
  • Offer Up

New Legislation is aimed at the need for sellers to disclose their identity. Perhaps the most notable piece of new legislation is the INFORM ACT, which went into effect on June 27, 2023.

Under the new law, “online marketplaces” (a phrase the statute defines) where “high-volume third-party sellers” offer new or unused consumer products must collect, verify, and disclose certain information about those sellers. Violations could result in civil penalties of $50,120 per violation for online marketplaces.

A ‘‘high-volume third party seller’’ is a seller in an online marketplace that, in any continuous 12-month period during the past 24 months, has had on that platform 200 or more separate sales or transactions of new or unused consumer products, and $5,000 or more in gross revenues.

Collection.  Online marketplaces must collect bank account information, contact information, and a Tax ID number from high-volume third-party sellers.

Verification.  Online marketplaces must verify the information they get from high-volume third-party sellers. They also must require sellers to keep their information current and to certify it as accurate at least once a year.

Disclosure.  For high-volume third-party sellers that meet a certain level of sales on a platform, online marketplaces must disclose in the sellers’ product listings or order confirmations specific information about the seller.

Suspension of non-compliant sellers.  Online marketplaces must suspend high-volume third-party sellers that don’t provide the information the law requires.

Reporting mechanism.  Online marketplaces must provide online high-volume third-party sellers’ product listings a clear way for consumers to report suspicious conduct.

So, what exactly is the INFORM Consumers Act and how might it help businesses contend with organized retail crime (ORC)?

The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act, or INFORM Consumers Act imposes hefty fines on online marketplaces that run afoul of the law. This is especially consequential, as the proliferation of online marketplaces in recent years has created a haven for thieves to sell stolen merchandise anonymously.

  • According to the Federal Trade Commission, the following changes will occur:
    • Under the new law, online marketplaces must collect, verify, and disclose certain information about high-volume sellers.
    • There will be more transparency in online transactions, which will deter criminals from acquiring stolen, counterfeit, and unsafe items for sale in online marketplaces.
    • Online marketplaces will be required to collect bank account information, contact information, and a Tax ID number from high-volume third-party sellers.
    • Online marketplaces will be required to verify the information they receive from high-volume third-party sellers.
    • Specific information, i.e., bank account information, tax ID information, contact information, etc. will be required for third-party sellers that meet a certain level of sales on a platform.
    • Online marketplaces will be required to suspend high-volume third-party sellers that do not comply with the new law.
    • Online marketplaces will also be required to provide a clear way for consumers to report suspicious conduct under the new law.

Furthermore, high-volume third-party sellers who choose to violate the law could incur civil penalties of $50,120 per violation. Add to this, the fact that State’s Attorneys General and other officials authorized by the state can file action in federal court to enjoin further law violation, seek civil penalties, obtain damages, restitution, or other compensation for a state’s residents, and you have a piece of legislation with some teeth.

COMMUNICATION

  • Alerting Neighboring Stores – Even Competitors
  • Crimestoppers Affiliation
  • Educate and inform employees
  • Employee training and awareness
  • Verifying ID, names, etc. on online sales

COLLABORATION

  • Conferences and Events with industry affiliates
  • Law enforcement, retailers, and stakeholders in retail
  • Useful to build a bigger case
  • Loss Prevention ORC Teams – use data, news surveillance footage, and evidence to understand the scope
  • Employees – i.e., product securement, location, etc.
  • Internal loss prevention databases

LEGISLATION

  1. Reduce Felony Theft Thresholds
  2. Stiffer penalties for online marketplaces

MITIGATION

  • Keep people, customers, and bystanders safe
  • Violence is on the increase
  • Gun use is on the increase
  • Educate employees
  • Inform employees
  • Develop a system to communicate
  • Technological Resources
    • Anti-Theft Shopping Carts
    • ORCA Databases (AUROR)
  • Cloud-based CCTV Systems (can help with prosecution)
  • Physical Security Improvements or Upgrades such as panic buttons to alert law enforcement
  • Expandable Barriers
  • Improved Lighting
  • Locker Rooms (to store targeted items in off hours)
  • Cages for sensitive merchandise
  • Key Management and Securement
  • Security Guards

ORC is NOT simply people breaking in and shoplifting in large groups. It is sophisticated fraud, which employs a number of different methods:

  1. Cargo Theft
  2. Burglary
  3. Return and Refund Fraud
  4. Counterfeit Money
  5. Credit Card Fraud
  6. Gift Card Fraud
  7. Human Trafficking
  8. Narcotics Trafficking
  9. Weapons Trafficking

Official Site of Homeland Security:

https://www.ice.gov/features/op-boiling-point

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