3 Popular Business Frauds That Don't Play Nice! How's Your Fraud Prevention?

Posted by Amanda Nieweler

on March 24, 2015

March Is Fraud Prevention Month

Fraud can hurt any business, any size. Of course the bigger the organization, the more resources are put in place to battle fraud, and the more slush fund there is to pay violations and fines.

And we know that fraud hurts more when you’re a smaller business because there just aren’t the resources or funding available to combat it. Fraud costs small business a median loss of $155,000, according to the ACFE. This is just too much for any small business to handle, and this is a huge threat to the success of that small business.

There are a few scams that the Canadian Anti-Fraud Centre highlights on their site – scams that businesses need to be on the lookout for. And keep in mind, this isn’t just limited to Canada; these three examples of fraud can affect any business anywhere, any industry, any size. No matter the size of the organization, it is important that all levels of staff be aware of these frequent scams. graphic with text on cracked rock

Wire Frauds

One type of wire fraud currently targeting businesses is the Business Executive Scam which is a type of phishing. The potential victim receives an email that appears to come from their employer’s human resources or technical support department. Fraudsters create email addresses that mimic that of the real departments. An email message will be sent to the accounting department advising that the “executive” is working off-site and has identified an outstanding payment that needs to be made as soon as possible. The “executive” instructs the payment to be made and provides a name and a bank account where the funds, generally a large dollar amount, are to be sent. Typical losses can be in excess of $100,000.00.

Phishing is the attempt to acquire sensitive information such as usernames, passwords, and credit card details (and sometimes, indirectly, money) by masquerading as a trustworthy entity in an electronic communication (Google)

Financial Industry wire frauds occur when Canadian financial institutions and investment brokers receive fraudulent email requests from what they believe to be an existing client. Unbeknownst to them, the email account of their client has been compromised. A request is sent by the fraudster to the financial institution/investment broker to have money transferred from “their” bank account usually to a foreign bank account.

Well that sounds… phishy. Here’s what you need to know

  • Beware of unsolicited emails from individuals or financial institutions presenting an urgent situation requiring immediate attention
  • Prior to sending any funds or product, make contact with existing clients in person or by telephone to confirm that the request is legitimate
  • Watch for spelling and formatting errors and be wary of clicking on any attachments, they can contain viruses and spyware

Directory Scams

Businesses receive an invoice for a directory, publication or listing that they did not order or authorize. Fraudsters will place a call to the business and speak to an employee and ask to confirm details such as the company’s address, telephone number and other particulars. An invoice is sent to the company and often payment is made by the accounting department not realizing the company never ordered or agreed to pay for the directory. The fraudster may tape record the initial conversation and use that against the company to verify the purchase of the directory.

Yikes, this one sounds so easy, yet so bad!

Here’s what you need to know

  • Educate employees at every level to be wary of unsolicited calls. Post notices and discuss these scams during staff meetings
  • Compile a list of companies that are typically used by your business, give authority to only a number of staff to approve purchases and pay bills
  • Fraudsters will use real company names like Yellow Pages to make the invoices seem authentic. Inspect invoices thoroughly prior to making payment

The Supplier Swindle

Businesses can lose a significant amount of money to fraudsters who claim to represent their regular supplier. The scam is targeting businesses that buy supplies from foreign wholesalers and usually involve a spoofed email informing the buyers of a change in payment arrangements. “Email spoofing refers to an email that appears to have originated from one source when it was actually sent from another source.” The email notice provides new banking details and requests that future payments be made to this “new” account.

This can certainly devastate a small business!

Here’s what you need to know

  • Beware of unsolicited emails from individuals or financial institutions presenting an urgent situation requiring immediate attention
  • Prior to sending any funds or product, make contact with existing clients in person or by telephone to confirm that the request is legitimate
  • Watch for spelling and formatting errors and be wary of clicking on any attachments, they can contain viruses and spyware
In an effort to prevent you from getting swindled, sFraud Checklistcammed, or bamboozled, check, we have another small tool you add to your arsenal – because every little bit helps in the fight against fraud!