COV E R
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 scamwhere 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
$10million 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 withmajor
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 seenmaking 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
conditionmay fail to be covered under another.
“I guess it depends,” says Don Elliot, 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 withmemo 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
SCAM 4
The bait-and-switch technique. There are many ways to pull off
this con, in which the thief swaps out real pieces for fake ones. One
way is simply asking to see a piece in the store and replacing it
with a fake when the jeweler turns away. Scammers may also buy
a diamond ring, take it home, switch the stone out, then return it
the next day, saying the intended recipient didn’t like it. Another
version involves bringing a ring in for repair and claiming on
pickup that the jeweler has changed the stone to a lower-value one.
SOLUTION:
Keep your eye on clients in the store and don’t leave them
alone with expensive items. Inspect returned pieces to make sure
they’re the same ones you sold. For repairs, have the piece inspected
by more than one person on intake, document its attributes and
even take a picture. Have the customer sign this documentation.
The honey trap.
This usually
involves creating
an intimate
relationship with
the jeweler, going
on a few dates, then
asking to meet
up at a hotel. The
scammer tells the
jeweler they’re
dressing up in a
sexy outfit and
asks them to bring
some of their most
expensive jewels
to complete the
ensemble. When
the jeweler does,
the scammer makes
off with the goods.
SOLUTION:
Be
careful whom you
trust, and don’t
take jewelry out of
the store if it’s not
necessary.
SCAM 5
16
SEPTEMBER 2020
DIAMONDS.NET
