The art of the sale is a code jewelers live by. Schmoozing with a customer can make or break a business, and jewelers have learned over time how to read their clients. What they don’t always realize is that scammers, too, have become more sophisticated in reading their marks.
Retail “shrink,” which includes theft, fraud and other losses in the sector, totaled $61.7 billion last year, according to the National Retail Federation (NRF), up from $50.6 billion the year before.
“Between an increase in incidents and new ways to steal, shrink is at an all-time high,” says Mark Matthews, the NRF’s vice president for research development and industry analysis.
The problem is twofold, experts say: Criminals are improving their techniques, and jewelers are becoming less meticulous and overlooking clues that should raise red flags.
“In the cases [that the Federal Bureau of Investigation] has worked over the last 10 years, we’ve seen an evolution in the sophistication of
their operational plans,” reports Steve Gonzalez, a special agent for the joint FBI/New York Police Department major-theft task force. “They sometimes mirror that of law enforcement, with diagrams, sketches, multiple visits to a location, etc. And it is very scary for a lot of jewelers to see, because I think the fantasy is that these are just individuals that are in need of money, who just come in, steal and leave,” rather than carefully targeting a specific jeweler’s business.
The situation has only gotten worse since the onset of the coronavirus, Gonzalez warns. “Jewelers are their own worst enemies sometimes. Because of the current climate, jeweler vulnerabilities are higher, and jewelers are more susceptible to the pressures of closing the deal faster, and they aren’t paying as much attention.”
Target practice
Even the most diligent of retailers can fall victim to a scam, but jewelers often make themselves easy prey without realizing it.
“It’s amazing how lax jewelers can become, because [as with] anything else, you get complacent, because it’s the same routine every day: You go to work, you come home. But the criminal is not doing that,” says Larry Lawton, a former jewel thief who now runs robbery-prevention service Reality Check and hosts his own YouTube channel. “I cased over 1,000 stores. I went in as a customer, and I saw their weaknesses. You know, a smash and grab, those guys are usually hard up, and they don’t plan. Those are the kind of guys that are very preventable. I’m the kind of guy that’s hard. To this day, I could rob a jewelry store. I look at them all the time and I think, ‘I could hit this guy, and not a chance he would know about it.’”
Security experts agree that scammers are far from indiscriminate in how they target stores.
“Nothing is by coincidence,” maintains Itay Hendel, CEO of ISPS, a leading security-consulting company for the jewelry sector. “They don’t just
go and attack stores because they are convenient, they attack because they see weak points. They
will always try to find the easy target, and if they see you are not an easy target, they will move on to the next store.”
Martin Winckel, founder of Europe’s Jewelry Alert Service, concurs. “Perpetrators seek victims, not opponents. They don’t want to attack anyone they perceive as too attentive. They are looking for people they can quickly and easily fool.”
Points of attack
The ins and outs of what makes a jeweler vulnerable are myriad, but the paramount theme is attentiveness. Paying attention to how you open your store, who’s in your store, where they are and what they’re doing can make all the difference.
“You’ve got to be conscious of what’s going on in and around your store all the time,” declares detective Joseph Metsopulos of the NYPD’s Major Case Squad.
That diligence is not something to take for granted. Scammers track everything that goes on in a store, compiling notes on factors that most would consider minute but that are key to creating a well-organized plan of attack.
“They do research on the target victim,” says John Kennedy, president of Jewelers Security Alliance. “They do it on social media, on their website, by telephone. They do it in a bunch of ways to determine things about the company. It’s nothing random, it’s all highly thought out.”
But it goes even further than that, notes Hendel, warning that scammers will often make several trips to a store before an attack, posing as a customer to gather information.
“If I present a piece of jewelry, and the customer asks to be shown another piece behind me and I turn around, I’m easy prey,” Hendel says. “Or if I open a showcase and leave the keys there, even for three, four, five seconds, I’m easy prey. If I let my client put a bag or papers on my counter, if I present too many items at one time and have a messy counter, if I let my customer get very close to me when I’m going to open my display, if I let my clients walk around the store [and don’t pay] attention to where they are and what they are doing, I’m an easy target. There are many, many things they will do to test you.”
It’s not just a jeweler’s interactions with customers that are under scrutiny, either.
“Criminals look to see how you open the store, if you are aware of customers coming in and out, or if you’re on your phone,” Hendel continues. “If you only have two salespeople but there are 12 customers in the store, are you aware of where all of them are at every moment?”
Lawton corroborates this. In his time as a jewelry thief, he says, it was these little bits of information that helped him decide if — and how — to attack a certain jeweler.
“When I cased stores, I could tell you every single detail about a jewelry store you would want to know,” he discloses. “Not only where the store is and what it looks like, but who comes and goes, what time, how many employees, what shifts they work, when the first guy comes in, what cars they drive — there isn’t a thing that’s not known. I can even tell you when the mailman comes, when the next-door neighbor opens his store, and when he gets his packages delivered.”
Playing the game
There are numerous scams criminals use to take advantage of jewelers, running the gamut from simple bait-and-switch and distraction techniques to playacting, long cons, credit card fraud and memo bust-outs.
“I dealt with a case where some guys called a jeweler and wanted to see high-end diamonds,” recalls Winckel. “They set up an appointment, visited the jeweler, and told him they were only the people that check the diamonds for the buyer. They agreed the diamonds were good, asked for them to be wrapped in a parcel and closed and put in the safe until they spoke with their boss, stating that they would come back the next day to purchase after they received approval. It was only when they failed to show up and the jeweler opened the parcel that he realized the diamonds had been replaced with cubic zirconia.”
Winckel isn’t the only one who has seen jewelers lose large amounts of money to swindlers.
“We had a scam where millions and millions of dollars were taken by a gang that was ‘borrowing’ product from luxury jewelry companies for photo and video shoots,” relates Kennedy. “It’s a common thing in the industry to lend jewelry for these fashion or music shoots, and then the company gets the credit of Beyoncé, or whoever, wearing their pieces.”
Oddly enough, the head of the gang was in prison at the time he pulled the job.
“He researched all this, saw who might be a likely borrower, who had borrowed before and who had loaned,” Kennedy recounts. “He bribed prison guards to get him a whole bunch of cellphones, and then he impersonated the vice president of a major music company. He got people to hand over million-dollar pieces. It turned out the whole thing was
$10 million or so, against the bluest of blue-chip luxury companies in the country.”
Credit card fraud has been around for a long time, but it is now becoming more prevalent online due to the shutdown of many stores amid the coronavirus pandemic. In the past, scammers would often use a stolen or fake credit card to make a purchase. But if the card had already been declared stolen or the fake card popped up a warning, they would lose out on the theft at best, and get caught red-handed at worst. In the updated version of this scheme, people sell their own credit card information to scammers to use in a single theft. Once the purchase appears on their credit card bill, they call the company and say they didn’t make the purchase and their credit information must have been stolen. They then have the sale reversed, they have their payment from the scammer, the scammer has the goods, and the jeweler is left holding the bag.
“That’s ingenious, it’s a great plan, if I were to be a criminal,” says Gonzalez. “This way, everyone wins, and then there’s no follow-up investigation [into the cardholder], because the bank or the credit card company may indeed look at it as a [standard] fraud.”
We’ve got you covered
Most jewelers take out insurance with major companies to prevent losses in such cases. The question is, does insurance actually cover these scams, and how can the jeweler’s actions make a difference in who ends up paying for them?
The answer isn’t clear-cut, according to security experts. In cases like those of the luxury companies that lent out jewelry for a video shoot, they’re usually out of luck if the product is not recovered.
“There’s no insurance in a case like that usually, if you willingly give over something to somebody,” says Kennedy. “You can have riders, you can have extra policies, but ordinarily, you would just take the hit. Most of these cases are really not insured — cases of fraud where there is a willing handover of product and there is no coercion involved.”
Lee Henderson agrees. “It all depends on if they’ve conducted the necessary checks,” he says. Henderson is an intelligence officer for the British Security Industry Association, which runs jewelry-security alert website SaferGems. “They’ve got to be seen making those [checks], either through their banks or through other systems. If they don’t, they’ll likely take the loss.”
A variety of factors can complicate the situation, according to insurance provider Jewelers Mutual, and even instances that are covered under one condition may fail to be covered under another.
“I guess it depends,” says Don Elliott, director of claims at Jewelers Mutual. “If the jeweler merely purchases, say, what they thought was gold and really wasn’t, that’s not a covered claim. However, if the jeweler purchased real gold and then at some point after, the perpetrator switched it for fake gold, it would be a covered claim.”
Often, the distinction has to do with whether or not the loss was preventable, and what part the jeweler played, explains Elliot. He points to memo bust-outs — in which the scammer poses as a dealer and makes off with memo goods instead of passing them along to a client — as an example of a theft that would leave the jeweler on the hook.
“If it’s clearly theft or robbery, those are covered types of losses. However, when a jeweler is entrusting their goods to another party, typically there are issues with providing coverage for that.”
Extra coverage is necessary for certain situations, such as traveling with jewelry for a show or to bring to a client. A jeweler with regular coverage but not travel insurance may not be protected if the scam occurs outside of the store premises.
Preventative measures
While scams account for less than 10% of the overall claims Jewelers Mutual sees each year, they are still significant, says Elliot. “It’s a smaller percentage than blatant thefts or robberies, but it is still something that happens, and jewelers need to take the proper precautions. Most important is trusting their gut instincts, experience level and expertise. If something doesn’t seem right or feel right, they should refrain from providing any goods.”
There are countless small things jewelers can do to help avoid getting swindled. Jewelers should be wary of specific transactions involving high-priced jewelry or watches originating from other states or countries, as well as rush jobs where customers want to buy right before closing, and emails from existing clients asking to purchase expensive jewelry.
“If you are a diamond dealer [or jeweler] and you’re selling a very significant amount of product to somebody, a telephone call to confirm that it’s actually legitimate is not crazy,” says Kennedy.
Hendel believes it’s all about control. In addition to keeping tabs on everyone in the store, jewelers need to keep doors to the back room and the safe area closed, and not let customers touch the display cabinets or put items on top.
Meanwhile, if the customer is in the shop, a good old-fashioned conversation can help ferret out scammers from real clients.
“If someone is buying a $20,000 watch, you’ve likely been speaking to them for a while,” comments Kennedy. “It’s not like they just walk in, pick it out and walk out.”
He notes that people who buy expensive pieces usually go to trusted jewelers, so if you’ve never seen them before, it should raise a red flag. “Ask them why they chose your store, if they’re visiting the neighborhood,” he suggests.
Gonzales agrees, adding that the longer a person talks, the more likely they are to lose their cover. “There’s a certain amount of vigilance that has to overtake a desire to close a sale,” he says.
Lawton recommends changing up the schedule every week or so, and not investing in how a person looks. Jewelers often see a well-dressed individual who appears wealthy, and automatically trust them.
“Don’t get clouded by the dollar signs in your eyes and take out the whole kit and caboodle in an effort to make a big sale,” he advises. “Because while you’re doing that, I’m literally calculating everything you’re showing me, I’m watching where it’s going.”
He also recommends displaying a few items in the store that would immediately deter scammers and thieves. “They could put a two-way mirror up — it doesn’t even have to be real. Just place a sign over it saying ‘Two-way mirror.’ Put a sign up on the door that says ‘Off-site, 24-hour monitoring,’ and that’s it, because that would scare a professional like me. I want to know every single little thing. I don’t want any surprises, period. So if I’m unsure how many people are in that store, or at what point I may be seen by someone off-site, whether you have that or not doesn’t matter. Just the idea that you might would make me think twice.”
It all comes down to taking it slow and paying attention to the details, says Gonzalez, even if it may mean losing a sale. “Sometimes it may be worth losing something in order to prevent losing everything.”
Article from the Rapaport Magazine - September 2020. To subscribe click here.