In March 2017, the owners of a chain of liquid stores were convicted of tax evasion. It was determined that the fraudsters shimmed $4 million in cash receipts from their stores. A second set of accounting books were used to keep track of the shimmed cash. The shimmed money was not reported to the tax authorities. The owners were sentenced to 41 months in prison and had to pay $428,000 in fines.

Definition

Although as the cliché says, „Every little bit helps“, every little bit can also hurt. Especially if the little bits are small amounts of money being stolen by an employee from their employer before the money is recorded in the company accounting system. 

This is the layman’s definition of “Shimming”, and a threatening challenge to loss prevention and compliance professionals in retail businesses.

Origin

Shimming is a slang term that sprung out of the white-collar crime era of the United States wherein persons involved in selling goods and services “Took money off the top”, meaning taking the money before the sale was reported in the company’s bookkeeping. The act of shimming causes three victims:

  • The company who loses a portion of profit from sales.
  • The victim who often is paying more for the goods and services.
  • The tax authorities who lose tax revenue.

Similar to many business frauds, shimming has been around a very long time, and in spite of technical advances such as automated cash registers and scanners, shimming persists to be a serious problem in retail operations. In addition, shimming causes inaccurate stock inventory as goods left the premises for which no sale was registered.

Do not fall prey to the illusion that shimming just takes place at cash registers in grocery stores and department stores. In any situation where a person sells goods and products for a company shimming is not only possible, but it will take place if the correct methods of prevention are not in place and being used. Some of the most common shimming fraud takes place in:

  • Retail Stores/ Fitness Studios/Gas Stations
  • Bars/Discos/Restaurants
  • Automotive Service Centers

Of course, many more sales situations could be added to the list, but the point is not to be focused simply on retail operations of the traditional sense.

How is it done?

Shimming is simple and does not require a great deal of skill or slight of hand. The dishonest employee, however, does have to come up with a method of mentally counting the money that is stolen during the course of the business day. Often cashiers work out of an open cash register and do not enter the sales into the register, accepting the cash paid by the customer, gives the appropriate change to the customer, but keeps the money. Many times, an empty drawer in the cash register or a container (Cup, small box, etc.), is used to hide the stolen money in until the employee finishes work. On the way to the area where the cashier must turn in the daily receipts, the money that the employee calculated during the shimming is removed from the cash register so that the cash count will be correct according to the cash register. Other schemes involve the dishonest employees placing paper clips or similar objects in the cash register drawer. Each object represents a pre-decided money note denomination that has been stolen. This makes it easier for the fraudster to keep track of the money they have stolen so that at the end of day the cash count will be simple and free of suspicion.

The Darker Side

A fact that is often ignored is that fraudsters do not pay taxes on money that they steal. The reasons are obvious, but the effect on tax revenues is not so obvious. According to statistics provided by the Association of Certified Fraud Examiners, roughly 28% of all cash frauds in business are done through skimming. Additionally, business owners in attempts to avoid paying taxes have been known to take money off the top so as not to report it as taxable income. Lastly, the darkest facet of skimming is related to organized crime. Small businesses that are extortion victims of organized crime feel themselves forced to shim funds from sales to pay the percentage that they are forced to pay criminals. In this situation, the shimming has the effect for the business owner of only paying taxes on the actual sales so as not having to pay taxes on money given to criminals which of course can’t be deducted as a business expense.

Preventing Shimming

Preventing shimming need not be expensive, but the loss prevention and compliance professional must keep the Fraud Triangle Theory in mind.  Clearly motive and rationalization causes of shimming will be almost impossible to control, but opportunity can be reduced greatly by establishing preventive procedures such as:

  1. Clear internal controls regarding cash register procedures
  2. Post signs in the cash register areas informing customers that they should receive receipts for their purchases
  3. A strict policy of no return of merchandise without receipts
  4. Periodic unannounced cash counts at random of cashiers
  5. An internal policy that does not allow cups and other containers near cash register

Conclusion

Shimming may be very easy for dishonest employees, but it is also easy to stop if the proper procedures are established and enforced. One of the things that make shimming so easy is that procedures either do not exist, or if they do exist, the procedures are not followed. Employees and management complain that the effort involved in prevention is too cumbersome, or are not needed. Managers would do well to listen to their compliance and loss prevention department because a little bit of shimming can be very harmful to the balance sheets in the long run.

German Summary

Ein altes Sprichwort sagt: „Kleinvieh macht auch Mist“. Sind die Geldbeträge noch so klein, kann sich dies dennoch zu Unmengen summieren.

Was genau bedeutet „Shimming“? Unterschlagung. Der betrügerische Mitarbeiter arbeitet meistens an der Kasse. Er nimmt das Geld der Kunden entgegen und steckt dieses in seine eigene Tasche.

Betroffen sind meistens:

  • Firmen, deren Einnahmen niedriger ausfallen
  • Kunden, die oft höhere Preise bezahlen und das
  • Finanzamt, weil die gestohlenen Gelder nicht versteuert wurden.

Diese Diebstahlmethode kann in jeder Form des Einzelhandels angewendet werden. Dabei ist es ein einfaches, die Gelegenheiten (Fraud-Triangle) durch präventive Maßnahmen zu reduzieren. Beispielsweise durch Erstellung klarer Protokolle bezüglich der Kassenabläufe. Beispielsweise durch

  • Anbringen von Schilder in Kassennähe, um die Kunden zu informieren, dass sie ein Kassenbon erhalten sollten oder durch die
  • Durchführung unangemeldeter Kassenkontrollen nach dem Zufallsprinzip.

‚Shimming‘ ist einfach für unehrliche Mitarbeiter. Mit effektiven Gegenmaßnahmen kann ‚Shimming‘ allerdings gut in Schach gehalten werden.

Schlagworte zum Thema:  Betrug, Einzelhandel, Compliance, Korruption