What is Skimming?

Skimming is the practice of removing a portion of the cash receipts of a business for personal use. Skimming is most common in a business that accepts a large part of its customer payments in cash, such as restaurants and food carts. The person skimming cash may even be the owner, since doing so reduces the reported profitability of the business, and therefore its income tax liability. Since the individual engaged in skimming is not reporting the stolen money as taxable income, he or she is also engaged in tax evasion. Each individual act of skimming may be quite small, but when conducted over a long period of time, it can add up to a substantial loss for a business.

In Which Businesses is Skimming Most Common?

Skimming is most commonly practiced in businesses where most sales are paid for with cash. It is especially common in businesses where there is a high level of employee turnover, which makes it more likely that new employees with questionable backgrounds will be hired. A business in which these two issues intersect is restaurants, where the wait staff routinely handles cash and there is a high degree of staff rotation.

Skimming Credit Card Information

Skimming can also involve the extraction of information from credit cards. This can be done with an illegal device, known as a skimmer, that is inserted into a point-of-sale terminal and which scans credit card information as cards are inserted by customers to make purchases. This card information is then used to make illicit purchases without the knowledge or approval of cardholders. A key task of credit card providers is to detect skimming transactions when credit card purchases are made, and refuse them.