Fencing Operations

Overview of Fencing Operations

ORC Operations (“Fencing”): Once the retail merchandise is acquired, several different methods are used to fence the products back into the marketplace. Potential outlets for fencing stolen goods include small convenience or second-hand stores, flea markets, swap meets, pawn shops, and more recently, online marketplaces. While stolen goods are commonly sold to individual buyers through these venues, in some cases, fencing operations may also employ sophisticated measures to clean and repackage products for resale to witting or unwitting wholesale distributors. With the growth of the Internet and online marketplaces, e-fencing, in particular, has emerged as a major concern for retailers and law enforcement.

According to the most recent National Retail Federation survey of retailers, 66 percent of retailers surveyed indicated that they had identified or recovered stolen merchandise and gift cards that were being fenced online. In contrast to more localized physical fencing operations, e-fencing is generally much more profitable and allows sellers a global reach. For example, retailers indicate that e-fencing can often yield 70 percent or more of the retail value of the product versus approximately 30 percent through traditional fencing venues. Further, e-fencing eliminates the face-to-face interactions that occur at physical fencing locations, thereby providing sellers with a perceived increase in anonymity.

A true “fence” is usually considered to be an established business person—one who knowingly purchases stolen property and redistributes it in any fashion for a profit. Six levels of fences have been identified:

• Level-1 fence: A thief sells to a level-1 fence (often a storeowner such as a pawnbroker or a jeweler), who then sells the goods in his store or else sells them to another fence.
• Level-2 (wholesale) fence: A level-2 fence buys from a level-1 fence and then often cleans up and/or repackages the goods to make it look as though they came legitimately from the manufacturer. These are very clandestine operations that are perhaps most likely to be found when working back from a level-3 fence bust (see below). Those who operate stolen car rings also fall within this fencing subtype.
• Level-3 fence: A level-3 fence takes repackaged goods from level-2 wholesale fences and diverts the goods to retailers. At times, major retailers will find themselves buying back the very goods that were stolen from them. Level-3 fences have been known to sell perfume, cosmetics, razor blades, and shoplifted designer goods in this way.

Commercial fences use their business front to recruit thieves who come in offering them stolen goods. (This is the commercial fence supplies market operating at Level-1.) They also mix stolen goods in with their legitimate stock. Somewhat perversely, this helps to sell legitimate stock, as people think they are getting a genuine bargain if goods are stolen, even when they are not. (This is the commercial sales market at Level-1.)