Identity Resolution Daily

By Jeff Stein, president of Executive LP Services and MonitorClosely.com

According to the U.S. Chamber of Commerce, 20% of all new business failures are a direct result of employee dishonesty. In 2006 retailers lost over $41.5 billion in inventory shrinkage. “This total is ten times the value of street crime losses annually in the USA,” according to Criminal Law Lawyer Source.

And in the preface to Biting The Hand That Feeds: The Employee Theft Epidemic, Terrence Shulman points out the FBI finding “that employee theft is the fastest growing crime in the United States.”

According to a National Retail Security Survey report, retailers lost:

• $19.5 Billion to Employee Theft

• $13.3 Billion to Shoplifting

• $5.8 Billion to Administrative Error

• $1.7 Billion to Vendor Fraud

These are some scary numbers for the small- to mid-size business owners who do their very best to make a profit, let alone retain their profits. So what can you do to help prevent and deter losses from occurring in your business without the resources and funds of a large corporation?

You absolutely have to be involved and know all aspects of your business.

• Reconcile your daily deposits - If the funds are off, inquire and reconcile ASAP.

• Spot check your people all the time.

• Use sealable bags, so once the deposit bag has been completed, no one else can tamper with it.

• Use clear garbage bags. It is too easy for an employee to put merchandise in the garbage and then retrieve it later.

• Break down cardboard boxes before they are carried out to the dumpster.

• Keep your books, store, and stockroom clean and organized. The more organized these areas are, the harder it is for employees to hide thefts and frauds.

• If you are a retailer with a cash register, refunds and voids are the easiest way for an employee to steal cash from you. Whenever possible, review all transactions of this nature with your employees. Ask to see the merchandise. Then do a hands-on count of that item to see if it reconciles properly.

• Install a Closed-Circuit Television (CCTV) system.

CCTV systems are important. Besides acting as crime deterrent and theft identification, the cameras can increase employee productivity, discourages inappropriate behavior, reduce liability, defend against potential litigation and can and should also be used to reward good behavior.

If you don’t know these already, here are the Top Ten Warning Signs of Internal Theft:

1. Discrepancies in daily or weekly counts
2. Missing paper work (manual receipts, post voids, no-sales)
3. Change in employee’s attitude/personality
4. Excessive use of gift card by employee
5. Frequent visitors or personal phone calls, having friends in store after hours
6. Inaccurate of falsified counts / paper work
7. Employee ringing own transactions
8. Employee asking to borrow money from other employees
9. Unexplained cash overages or shorts
10. Improper use of register key

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By Jeff Stein, president of Executive LP Services and MonitorClosely.com

According to the U.S. Chamber of Commerce, 20% of all new business failures are a direct result of employee dishonesty. In 2006 retailers lost over $41.5 billion in inventory shrinkage. “This total is ten times the value of street crime losses annually in the USA,” according to Criminal Law Lawyer Source.

And in the preface to Biting The Hand That Feeds: The Employee Theft Epidemic, Terrence Shulman points out the FBI finding “that employee theft is the fastest growing crime in the United States.”

According to a National Retail Security Survey report, retailers lost:

• $19.5 Billion to Employee Theft

• $13.3 Billion to Shoplifting

• $5.8 Billion to Administrative Error

• $1.7 Billion to Vendor Fraud

These are some scary numbers for the small- to mid-size business owners who do their very best to make a profit, let alone retain their profits. So what can you do to help prevent and deter losses from occurring in your business without the resources and funds of a large corporation?

You absolutely have to be involved and know all aspects of your business.

• Reconcile your daily deposits - If the funds are off, inquire and reconcile ASAP.

• Spot check your people all the time.

• Use sealable bags, so once the deposit bag has been completed, no one else can tamper with it.

• Use clear garbage bags. It is too easy for an employee to put merchandise in the garbage and then retrieve it later.

• Break down cardboard boxes before they are carried out to the dumpster.

• Keep your books, store, and stockroom clean and organized. The more organized these areas are, the harder it is for employees to hide thefts and frauds.

• If you are a retailer with a cash register, refunds and voids are the easiest way for an employee to steal cash from you. Whenever possible, review all transactions of this nature with your employees. Ask to see the merchandise. Then do a hands-on count of that item to see if it reconciles properly.

• Install a Closed-Circuit Television (CCTV) system.

CCTV systems are important. Besides acting as crime deterrent and theft identification, the cameras can increase employee productivity, discourages inappropriate behavior, reduce liability, defend against potential litigation and can and should also be used to reward good behavior.

If you don’t know these already, here are the Top Ten Warning Signs of Internal Theft:

1. Discrepancies in daily or weekly counts
2. Missing paper work (manual receipts, post voids, no-sales)
3. Change in employee’s attitude/personality
4. Excessive use of gift card by employee
5. Frequent visitors or personal phone calls, having friends in store after hours
6. Inaccurate of falsified counts / paper work
7. Employee ringing own transactions
8. Employee asking to borrow money from other employees
9. Unexplained cash overages or shorts
10. Improper use of register key

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[Daily Post from Infoglide Software] Knowledge Center: Jeff Stein Returns With Loss Prevention Tips

“In [today’s] post, ‘Don’t Let Others Shrink Your Profits,’ Jeff shares some great ideas on how to keep your employees from walking out the back door with your merchandise. Plus, don’t miss his ‘Top Ten Warning Signs of Internal Theft.’”

gtnews.com: The Origins of AML

(Registration required) “The risks associated with money laundering are: Legal/reputational risk: The potential for negative publicity regarding an institution’s business practices will cause a decline in the customer base, costly litigation or revenue reductions….”

NPR : Inside the Terrorist Screening Center

“‘What we can do for people if they are being misidentified — we can give them information to help them avoid or minimize the inconvenience that they face,’ he says. Boyle says the TSC intends to go further later this month. Specific high-ranking officials in various agencies will be given responsibility for taking care of these cases. He says that will create more accountability, help find errors, and make sure the terrorists they are tracking are really terrorists.”

Kentucky.com: Grocer reaches plea deal in theft ring case

“According to the indictment, Sulaiman took checks from fences who worked in organized retail theft, which involved stealing and repackaging baby formula and over-the-counter drugs, put the money in his bank account and then withdrew cash for the fences.”

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He’s back.

Jeff Stein, Loss Prevention guru and guest blogger returns tomorrow with some great Loss Prevention tactics for small to mid-sized retailers.

In 2006 retailers lost over $41.5 Billion in inventory shrinkage, according to a National Retail Security Survey. And with your very own employees responsible for almost half of that loss, how can the little guys keep in business without the resources available to a large corporation?

Here’s an easy tip from Jeff: “Use clear garbage bags. It’s too easy for an employee to put merchandise in the garbage and then retrieve it later.”

Jeff’s expertise in Loss Prevention began over 20 years ago, starting at his first LP job as a store detective for Haynes Department Stores. Now the president of Executive LP Services and MonitorClosely.com, Jeff kindly lends us his time and knowledge in bi-weekly posts.

Identity Resolution Daily’s Knowledge Center is a series of guest posts authored by some of the nation’s leading experts in identity resolution, loss prevention, fraud prevention and risk management. We also from time to time feature guest posts from authorities in federal government, retail, insurance and financial services sectors.

In tomorrow’s post, “Don’t Let Others Shrink Your Profits,” Jeff shares some great ideas on how to keep your employees from walking out the back door with your merchandise. Plus, don’t miss his “Top Ten Warning Signs of Internal Theft.”

Previous Knowledge Center posts by Jeff Stein:

• The Risky Business of Loss Prevention — “Loss Prevention is dangerous work. We are the first line of defense…

• Tech Tools to Trap ORCs — “One of the guys we caught actually had a typed report on how to shoplift. It was a complete instruction manual on…”

• Loss Prevention - Then vs. Now — “The fraudulent refunds that went undiscovered because employees and customers know how to stay under the radar by slightly changing their identity and or address can no longer hide anymore…”

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[Daily Post from Infoglide Software] Why Banking Secrecy Act Compliance Officers Drink Maalox

“If you have a Latin, Muslim or Arabic name and your name is similar to a terrorist, it can cause you inconvenience, perhaps even financial hardship. But the next time you’re having trouble getting through airport security, it might amuse you to know that your name is causing fits among Bank Secrecy Act (BSA) compliance officers all over the world.”

FT.com: Banks braced for fines

“James Freis, director of the Financial Crimes Enforcement Network (FinCen), a division of the Treasury that investigates money laundering, said last month that ‘myths’ about big penalties for minor lapses in banking requirements should be dispelled and that federal financial regulators were making ‘great efforts’ to eliminate uncertainty about what they expect in a ’solid, risk-based,’ anti-money laundering programme.”

Information Today: New Database Pools Info to Fight Retail Crime

“According to NRF’s 2006 Organized Retail Crime survey, 81 percent of retailers said they have been victims of organized retail crime. Nearly half (48 percent) of those polled also have seen an increase in organized retail crime activity in their stores. With widespread adoption of the LERPnet system, retailers and society in general should begin to see real progress in fighting illegal activities, loss of merchandise, and the overall dangers and cost caused by criminal organizations. One blogger, who commented on the power of communication, wrote, ‘A lot of other industries and law enforcement agencies should follow this example.’”

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By Glenn Hopkins, Director, Financial Services

If you have a Latin, Muslim or Arabic name and your name is similar to a terrorist, it can cause you inconvenience, perhaps even financial hardship. But the next time you’re having trouble getting through airport security, it might amuse you to know that your name is causing fits among Bank Secrecy Act (BSA) compliance officers all over the world.

If you’re curious to know if your name might be in the Specially Designated Nationals (SDN) list (PDF), go to the Instant OFAC site and type in your name.

OFAC is the Treasury Department’s Office of Foreign Assets Control, which “administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction.” OFAC publishes Financial Crime Enforcement Network (FinCEN) Advisories and the SDN list.

Bankers are required to check their customers names against names on the SDN list, but with foreign names it’s exceedingly complicated.

Here’s the problem, according to Jeff Jonas:

“When resolving identities, understanding when names are similar is critical. And it requires very sophisticated algorithms to handle global name issues like transliteration. For example, while Mohammed is represented one way in Arabic, it can be spelled over 100 ways when translated to English (e.g., Mohamed, Muhammad, Mohammad, etc.) – the shortest of which is Mhd.”

Actually, Arabic expert Thomas Milo says there are over 200 ways to spell Mohammed. This is causing increased Maalox consumption among BSA compliance officers when a small difference in a name with one “m” or two can end up resulting in very big fine.

Reuters reported earlier this month that

“Bankers cautiously welcome moves to ‘tidy up’ sanctions lists, but say they want more.

“‘There is always room for improvement,’ said Hany Abou-El-Fotouh, first vice-president for corporate governance and compliance at Arab Banking Corporation, Egypt, a small bank which gets on average 20 possible matches a day with Arabic names on sanctions lists. ‘We on the compliance front expect more effort to be put into cleaning up or updating the lists, or supplementing them with key information to make our life easier.’”

Federal regulators recently updated the BSA with the intention of giving bankers a clearer understanding of what exactly BSA and Know Your Customer (KYC) compliance means and how it will be enforced. Unfortunately, the update just added more irksome ambiguity to what is required.

This section, in particular, drives me nuts:

“…A BSA Compliance Program must include a Customer Identification Program with risk-based procedures that enable an institution to form a reasonable belief that it knows the true identity of its customers.”

What is the legal, enforceable definition of a bank’s responsibility to “form a reasonable belief that it knows the true identity of its customers?”

Just how complicated can resolving foreign names get? Grab your bottle of Maalox and read my colleague Brian Calvert’s post on Playing the Name Game with Terrorist Watch Lists and Shoplifter Databases for a dizzying list of all the variables involved in figuring out who your customers are.

The only reasonable way to know the true identity of your customer is with an identity resolution solution. To quote Brian, “When it comes to making computers and people smarter in their search for names there are vast differences between name matching and simple similarity technology versus sophisticated identity resolution software like Infoglide Software’s Identity Resolution Engine (IRE) that incorporates over 70 carefully tailored algorithms to reliably compare data of special types.”

For more on transliteration, see:

The Politics of Naming: Post-9/11 Security and the Transliteration of Arabic Names

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[Daily Post from Infoglide Software] Insurance Companies: Here’s an Easy Way to Save a Half Million Dollars

“If Humana had only had the ability to tap into the data they already had in house, they could have saved themselves from a half million dollar fine, not to mention the bad publicity.”

Christian Science Monitor: Shift in Pentagon’s security-privacy balance?

“While many security experts argue that the amorphous nature of the terrorist threat demands a comprehensive response, they also question the advisability of casting a wide net that infringes on Americans’ privacy rights.”

BloggingStocks: Best Buy (BBY) clerk steals $13,000 in store gift cards

“A sales clerk at the nation’s largest consumer electronics retail chain was arrested recently for using fraudulent credit cards to purchase over $13,000 in legitimate gift cards. The credit cards were actually obtained from another party, but using them to buy gift cards constituted third-degree larceny.”

EDP24: Police target young shoplifters

“We won’t forget and we will tell your future boss. That was the stark warning from police last night to children intent on shoplifting in the region’s retail capital. […] The crackdown - which has already seen shoplifting in the city halve in just two weeks - warns young people that a moment of madness for the sake of a CD, some clothing or cosmetics will lead to an “embarrassing ordeal” and land them with a criminal record.”

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Poor Humana Insurance Co. In their 4Q earning report from 2006, the company stated that “Medical membership grew 4.2 million in 2006 to 11.3 million.” Unfortunately, this year Humana broke the law by using unlicensed agents to sell Medicare Advantage and prescription drug plans to Oklahoma seniors and was fined a hefty $500,000:

“Humana spokesman Jeff Blunt said the 68 agents in question were licensed, but not in Oklahoma. ‘What happened here was a border issue,’ Blunt said. ‘Oklahoma residents living near the border traveled across state lines or called an agent in another state and enrolled in a plan through those agents.”’

Actually, this was a database issue. And fixing the problem would have been easy, not to mention affordable.

The names of the Oklahoman customers were in a company database. The addresses of these Oklahoma residents were also in a database. And the names and addresses of the out-of-state agents who sold the plans were in a database. So why oh why then weren’t these new plans automatically rejected? Why couldn’t the data from the all the various databases be accessed to provide actionable business intelligence?

You know the CFO of Humana is asking that question now.

If Humana had only had the ability to tap into the data they already had in house, they could have saved themselves from a half million dollar fine, not to mention the bad publicity.

This is what Jeff Jonas has called “enterprise amnesia,” which happens when “an organization misses the obvious (e.g., when other relevant information is trapped elsewhere in their organization) and then takes incorrect action.” The problem is that the individual nuggets of information are too often contained in disparate silos - with no effective way to provide a “big picture” view that can be acted upon.

If Humana had had an identity resolution solution in place, they could have sifted through all their information — across different databases, systems and geographies. Then as the new plans came in from the agents the identity resolution solution could have searched the employee/agent database to ensure that the agents was licensed within Oklahoma.

Simply put, an identity resolution solution solves the enterprise amnesia problem — and prevents big fines — by allowing an organization to manage the identities of its customers, vendors, and employees across the enterprise.

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Poor Humana Insurance Co. In their 4Q earning report from 2006, the company stated that “Medical membership grew 4.2 million in 2006 to 11.3 million.” Unfortunately, this year Humana broke the law by using unlicensed agents to sell Medicare Advantage and prescription drug plans to Oklahoma seniors and was fined a hefty $500,000:

“Humana spokesman Jeff Blunt said the 68 agents in question were licensed, but not in Oklahoma. ‘What happened here was a border issue,’ Blunt said. ‘Oklahoma residents living near the border traveled across state lines or called an agent in another state and enrolled in a plan through those agents.”’

Actually, this was a database issue. And fixing the problem would have been easy, not to mention affordable.

The names of the Oklahoman customers were in a company database. The addresses of these Oklahoma residents were also in a database. And the names and addresses of the out-of-state agents who sold the plans were in a database. So why oh why then weren’t these new plans automatically rejected? Why couldn’t the data from the all the various databases be accessed to provide actionable business intelligence?

You know the CFO of Humana is asking that question now.

If Humana had only had the ability to tap into the data they already had in house, they could have saved themselves from a half million dollar fine, not to mention the bad publicity.

This is what Jeff Jonas has called “enterprise amnesia,” which happens when “an organization misses the obvious (e.g., when other relevant information is trapped elsewhere in their organization) and then takes incorrect action.” The problem is that the individual nuggets of information are too often contained in disparate silos - with no effective way to provide a “big picture” view that can be acted upon.

If Humana had had an identity resolution solution in place, they could have sifted through all their information — across different databases, systems and geographies. Then as the new plans came in from the agents the identity resolution solution could have searched the employee/agent database to ensure that the agents was licensed within Oklahoma.

Simply put, an identity resolution solution solves the enterprise amnesia problem — and prevents big fines — by allowing an organization to manage the identities of its customers, vendors, and employees across the enterprise.

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[Daily Post from Infoglide Software] The Price of Freedom: Privacy vs. Security

“The price of freedom is eternal vigilance,” Thomas Jefferson said. Conversely, the reverse is true: The price of eternal vigilance is freedom. To make the nation more secure from threats both external and internal, federal, state and local authorities have from time to time restricted some freedoms.”

FCW.com News: Personal data: Up close and impersonal

“A better balance between national security and privacy might be feasible now with technology that anonymizes data, some computer science researchers say. The anonymization technique relies on software to scour scrambled data, such as passenger manifests and watch lists, which is encrypted and intelligible only to computers. The software flags any matches or suspicious patterns among datasets so government authorities can request additional information.”

World-Check: FFIEC releases revised BSA/AML Examination Manual

The Federal Financial Institutions Examination Council, which is composed of all the major Federal regulators, has today released its revised edition of the FFIEC Examination Manual. Readers wishing to access the 407 page, 2.3 Mb document, in pdf format…”

Forbes: Dirty Dineros

“Union Bank of California, the nation’s 27th biggest bank and the main unit of UnionBanCal Corp., is working to resolve with the feds money laundering issues involving drug profits. […] UnionBanCal disclosed in July that it’s facing U.S. Treasury Department civil penalties for violating anti-money laundering regulations.”

KVUE: Retail theft evolving into big business

“Organized retail thieves are thriving in North Texas, and raking in as much as $7 billion a year. The system usually consists of a team of people that includes a “booster.” As designated people distract employees, authorities say boosters begin the act of stealing.”

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