Returns fraud costs retailers billions. A new AI program can detect when fraudsters are sending back counterfeits.

• Lacoste uses Vrai AI technology to detect counterfeit returns.

• Returns fraud costs retailers billions and billions are lost worldwide.

• Amazon and other retailers are facing scams that exploit return policies for financial gain.

Spotting designer knockoffs is now easier than ever.

French luxury brand Lacoste is using Vrai, an AI technology developed by Cypheme, a leader in anti-counterfeit artificial intelligence, to catch fraudsters who return counterfeit items.

According to Semafor, Vrai aims to distinguish genuine products from counterfeits with 99.7% accuracy by training on thousands of images of real goods.

In its warehouses, Lacoste employees can use Vrai to take a photo of a returned item and verify its authenticity. The AI ​​model can detect subtle variations, from a slight color variation to an extra tooth in the brand’s signature crocodile logo.

Representatives for Lacoste and Cypheme did not respond to Business Insider’s request for comment.

The technology combats return fraud – a growing practice of exploiting return and refund processes for financial gain. Often it involves returning various items for a refund. Some companies have even received boxes full of building blocks after customers provided refunds for items like televisions.

According to a report published by the National Retail Federation and Appriss Retail, total retail industry revenues in 2023 amounted to $743 billion worth of merchandise. U.S. retailers have lost just over $100 billion to return fraud, or about $13.70 for every $100 returned, up from $10.40 per $100 in 2022.

Large retailers are frequent targets of such scams. In July, Amazon filed a federal lawsuit accusing a Telegram group of stealing more than 10,000 items through fraudulent returns. Members of the group made up stories to convince Amazon customer service to refund their accounts, sometimes even using fake police reports.

Amazon, along with other online giants like Walmart, Target and Wayfair, also found itself targeted by a criminal gang that recruited legitimate buyers to purchase items, receive a refund, and then keep or resell the goods. According to a federal indictment, the group exploited a “no-return-refunds” policy that allows customers to receive refunds without physically returning items – an option that many retailers have adopted to reduce return shipping costs for both themselves as well as for consumers.

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