Clarity Systems, an AI powered company that can detect retail fraud by seeing inside returned products without having to open them, said it has just closed a $4.4 million seed round.

In a statement, it said the funding was backed by LMnT Ventures, with participation from Regeneration VC, Humba Ventures, and Massive Technology Ventures.

Clarity System said its technology sees inside returned and received products in three seconds without having to manually open them, which allows retailers to catch counterfeits, product swaps, and manipulation by comparing items or potential fraudulent items against the original manufacturer profile.

It’s similar to how an airport X-ray scanner identifies the contents of luggage without unpacking it. Clarity’s system analyzes the product, and instantly detects anomalies such as counterfeit goods, product swaps, missing components, or other forms of return fraud.

It was founded by Andy Ruben, Darrell Whitelaw and Sender Shamiss, seasoned veterans of the retail and returns industry, who recognized the immediate need for market changing innovation to address returns fraud, which continues to be one of retail’s fastest-growing challenges.

Within the year, Clarity has already signed on major national retailers in their returns and receiving operations.

According to Appriss Retail and Deloitte, returns fraud costs retailers an estimated $103 billion in 2024, representing more than 15 percent of all returned merchandise. In response, many retailers have implemented broad return restrictions that create friction for honest shoppers rather than precisely identifying fraudulent activity.

Clarity offers a smarter approach, using AI to distinguish legitimate returns from fraudulent ones in seconds, allowing retailers to reduce losses while preserving a seamless customer experience.

“Retail fraud has become a professional industry, run at scale against the returns counter and the receiving dock, and most defenses were built for a shoplifting era. We built Clarity to catch it the moment it enters the building,” said Andy Ruben, cofounder and CEO of Clarity.

The funders saw its potential too to solve one of the retail industry’s most pressing and elusive challenges.

“Return fraud is a stubborn, massive problem hiding in plain sight, costing the world’s largest brands billions and ultimately leaving everyday consumers to foot the bill. And it’s a problem that the founders, each with extensive experience in the retail and returns world have had to endure for decades,” Jeff Miller, founder and managing partner of LMnT Ventures, said.