EFFECTS OF DATA PATTERN RECOGNITION
BUSINESS BACKGROUND
1. Most of the organized retailers are alive to the situation of possible fraudulent refund transactions but still they have to caters for two aspects as part of refund policy :-
(a) Customer satisfaction – ensuring that in case of defective product being sold from their shop, the customer should have a hassle free refund for this defective product.
(b) To cater of wrong Billing – in case of wrong billing to customer, there should be a process to reverse the sales and refund the amount to customer.
2. Generally the Standard Operating Processes, designed by the businesses, have the following thought process to exercise controls over the refund policy :-
(a) Refunds are time bound ie no refunds after stipulated time line.
(b) Refund being sought should be supported by original bill of sales.
(c) Refund process should be supervised by store supervisor as a check on cashier.
(d) Periodic checks on refund transactions by store managers and city heads.
DETECTION OF FRAUDULENT CASES BY DATA PATTERN RECOGNITION
4. In the event of failure of all of the above checks (quite common and frequent), pattern recognition of available data can indicate possible fraudulent refund cases.
5. During day to day activity at store levels, huge sales data gets captured by the system and is stored in data ware house. That would include data on return sales, by default. The following data can be listed out in appropriate layout to assist data interpreter :-
(a) Data on bills having negative value.
(b) Data on bills having sale reversals within a bill.
(c) Data on sale reversal for a particular store along with the last time this article was sold from store (for which sale reversal was affected).
6. Every fraudulent mind has a set pattern and no two fraudulent minds (if not planning jointly) would resort to same means to derive personal benefits through fraudulent activities. In the instant case, there could be following set of pattern emerging from the data analysis, which could be indicative of a possible fraud :-
(a) A cashier could be most comfortable in carrying out fraudulent refunds of high value SKUs only.
(b) It could be that a cashier is comfortable carrying out refund at specific times only ie at times when there is least customer presence or a time nearing the shift end or at time when store senior staff is not present at store etc.
(c) Periodicity of refund transaction is one of the major indicators of possible fraud.
(d) A cashier could be comfortable in affecting refunds for articles never sold during the permissible time line.
EFFICACY OF PATTERN RECOGNITION ( AN EXAMPLE)
7. Data in requisite format was pulled out for the period of 30 days for one particular state. It was compiled so as to have a HISTORICAL perspective. On applying required filters, it emerged that in one particular store, there was repeated negative sales of certain staples (all of them used as ingredients for preparation of SOUTH INDIAN DISH). The data was analyzed in following phases :-
(a) The analyses indicated that a particular cashier ID is being used to carry out sales reversal for these SKUs (ground verification later proved that this cashier was of South Indian Origin).
(b) The refunds were being affected between 1400 hours to 1445 hours. (shift duty of this cashier was upto 1500 hours). Reversing sales of particular SKUs nearing end of shift timings indicated that it was not customer related refund case.
(c) Further analyses of data proved that sale reversal was happening for continuous 6 days, with no sales reversal of these SKUs on 7th day. This was due to the fact that front end cashiers have a day off after 6 days of duties.
(d) For the period under review, it emerged that for 2 consecutive days, there were no sales reversal for such SKUs from this store indicating absence of this cashier during these days (it got proved later that he was on leave during those two days).
8. Armed with this analyses, the Security Team visited the store and it got verified that :-
(a) There were no customer dockets to support such refund transaction (Supervisory checks incorporated in SOP failed to detect this anomaly).
(b) This South Indian cashier was the only one involved in carrying out refunds of the articles in question (it got proved that there was no customer/ quality issue related to these SKUs. Had that been the case, other cashiers would also be forced to carry out similar transactions – but that was not the case).
(c) On being questioned, the cashier explained that he used to spare Rs 100/- everyday by this activity and also take home the SKUs for meals.
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