Return fraud can be carried out in a myriad of ways. Here are some common methods through which consumers may attempt to cheat you this holiday season and beyond.

Some tactics primarily target in-person brick-and-mortar settings.

Using a discarded or stolen valid receipt, fraudsters find the item listed in the store and proceed to the cash register to "return" the product.

While most retailers require customers to sign a return form, asking for ID as proof of identity may deter some bad actors. Offering store credit over cash refunds can also be helpful.

In this case, instead of using a discarded receipt, the fraudster makes a purchase, leaves the store and immediately returns with the receipt and finds another of the same item off the shelf to "return," claiming that they changed their mind.

Ensuring product codes match on the receipt and applying code-laced liquids only visible to UV light are two prevention strategies.

Fake receipts are readily available online and can save fraudsters the time and energy required to complete the fraudulent activities above.

Training your employees to be on the lookout for fake receipts is a strong prevention strategy. Compiling a list of serial returners is also critical to help thwart this type of attack

This classic retail cheat involves purchasing an item for temporary use with the intention of returning it for a full refund—for example, buying a designer suit to wear only once.

Placing tags in highly visible places on items of clothing can help prevent people from trying this tactic, as the customer cannot remove them.

According to Allan Zander, CEO of retail customer engagement company omNovos, sweethearting occurs when a store employee helps a customer perpetrate fraud. For example, a cashier tapes a barcode to their wrist and then appears to scan one item but instead scans a much cheaper item, or when a store employee discounts a item as if it were damaged, when there is nothing wrong with it.

To defend against this, Zander says to keep an eye out for an abnormal increase in sales of inexpensive items and use security cameras to identify the source.

While some of the above tactics, like wardrobing, can also translate to the e-commerce setting, online shopping comes with its own unique refund vulnerabilities.

This common refund fraud occurs when the e-commerce retailer must refund a disputed purchase. The fraudster can be either a criminal or a customer. In the case of the former, the online purchase is initiated by a criminal using a stolen account or credit card to buy an item online. The cardholder notices the unfamiliar charge and understandably requests a refund. In the customer scenario, the legitimate account or cardholder disputes a purchase with their issuing bank instead of the retailer, thus initiating a chargeback.

The financial threat for retailers is significant. Mitigating the risk is difficult, but refund tracking and limiting reasons for allowable refunds can reduce the impact.

Today, those who wish to commit refund fraud but don't want to go through the trouble of initiating the refund with customer service can have someone do the dirty work for them. Cyber criminals post refund services on online forums or social media, listing companies they can guarantee refunds for. Once the retailer initiates the refund, the cardholder pays the fraudster a fee for the service.

Steps for fighting this type of fraud are limited but can be approached in a similar manner as chargeback fraud by tracking refunds and limiting reasons for allowable refunds.

Some fraudsters will scour liquidated or heavily discounted goods from a secondary market source, then initiate a return for full retail value with the e-commerce retailer.

Practices like monitoring inventory and return levels can help reduce the risk of secondary market fraud.

When the return process is optimized, the risk of fraud diminishes. Moreover, creating a positive return experience can improve brand loyalty. However, Zander warns, it is highly unlikely that a retailer will be able to reduce theft to 0% or increase brand loyalty to 100%. Instead, he says, retailers should seek to find the right balance and take steps to reduce theft and increase brand loyalty as much as possible.

"I can see a system in place whereby customers process their own returns," he says. In this scenario, a customer would scan their mobile app on a dedicated self-checkout system. Such a system would be positioned to prevent customers from entering into the main part of the store and picking up items from the existing shelves to return. When items are scanned, a cross-reference would occur to verify that the customer purchased the item previously. Items would be left in a dedicated area and the customer is monitored to ensure they leave empty-handed.

For e-commerce, revisiting (and perhaps hardening) return policies is necessary. In some cases, retailers may want to adjust when refunds are issued. As long as the customer experience isn't drastically affected, avoiding issuing refunds too early can help catch fraudulent claims in action.

Other practical streamlining strategies for e-commerce include identifying repeat offenders and putting an escalation process in place for refund request calls to be routed to a trained fraud team member.