No matter what type of business you run, it is susceptible to fraud. It’s because there are various ways cybercriminals can attack a firm. Hence, making it difficult to protect from all of them.
In 2020, the number of identity theft and fraud reports worsened. It increased 45% from 2019, which is mostly due to identity theft.
The increase in this number is putting businesses and customers at risk. As hackers and cybercriminals are getting better with their techniques to steal data, organizations need to double their security effort. They need sufficient security measures to protect their data from fraud.
Although there is no single way to protect against all threats, learning about the basics can be critical in protecting your business. It reduces the risk of data loss and other attacks.
What is Fraud?
There are different types of fraud, but it has only one purpose, to gain something by withholding a piece of information or providing a false statement.
The perpetrator has access to information the victim doesn’t know. The information can be used for illegal activities to deceive the victim for financial gain. Hence, it is treated as a criminal matter. The difference between fraud and theft is that there is the involvement of deception.
Some fraudulent activities can be a crime, and the perpetrator can be convicted.
When businesses become a victim of fraud, the main cause is financial loss. But there are other ways that fraud can affect a business.
- destroys the reputation of a business
- Extra cost for checking
- Impact on customers’ experience (reduce customers and returning customers)
- Loss of employees
- Company morale
You can prevent these effects on your business by practicing safety measures. But before knowing about them, here are common fraudulent activities you need to get to know. By learning about these common frauds, you’ll be able to prevent them as much as possible.
Fraudulent Activities That Affects Businesses
Your company could lose millions of dollars due to identity theft. Once fraudsters gain access to the identity of your company, they can use it to access financial and bank statements and federal tax identification numbers.
Furthermore, even employees’ paychecks can be used to gain access to the business’s bank account. Then they can steal money.
Another common fraud businesses encounter on their daily transactions is return fraud. There are various ways return frauds can happen. A fraudulent customer can buy a product, use it, and return it. Or, someone can steal a product and return it for money.
Return fraud can affect your business, financially, and its reputation. You might be hesitant to accept returns even if it’s legitimate.
It can happen when an employee gets injured outside of work but insist that it happen within the work environment. Therefore, the business owner is required to pay for their employee’s bills and other losses due to the accident.
Money fraud is the use of fake money. The problem with money fraud is that the business and customers are not aware of the fake money. Therefore, it keeps on circulating and will often be detected when deposited in the bank.
It happens when employees lie about their work hours, ask someone to clock in for them or ask in advance without paying.
After getting to know what threats you might encounter, it’s time to protect your business from them.
How to Protect Your Business Against Fraud
Protect Your Business’s Bank Accounts
First, business owners should separate bank accounts for their personal and business use. It is to prevent access to both accounts if a data breach occurs. Make sure to choose a bank that provides better security. Check if they provide multiple security protection for online access to your bank accounts like password and two-factor authentication.
Activate automatic alerts on your bank and credit card accounts.
You can also provide a separate bank account for business payroll or employees’ salaries. In case one of your employee’s payroll has been hacked, the attacker can only access the payroll account with a limited fund and not the business’s entire finances.
Furthermore, create reimbursement policies for employees to monitor the expenses well. You also keep your employees’ credit cards secured by providing fraud protection.
Educate You and Your Employees
Knowledge is crucial in keeping everything secure in your business. The more you know, the more you can protect your finances and data. The first thing you need to do is educate yourself about the types of fraud and their source. Research the latest news on fraud and other cybersecurity attacks so you’ll know what to do with your business.
By informing yourself, you can also teach your employees how to be cautious and avoid scams and frauds that can put your business at risk.
Furthermore, you can teach employees to spot counterfeit bills, bad checks, and stolen credit cards.
Protect All Devices
When we say all devices, we mean including employees’ smartphones. Hackers are experts when spreading threats that can infect devices and ultimately gain access to your business data. To avoid such, make sure that your networks and computers are protected.
You can use a sturdy firewall to protect incoming and outgoing data while managing company data. Antivirus software is also vital in protecting devices from your PC to smartphones. It can scan for threats and phishing emails or websites.
Aside from using tools, you can keep devices and accounts safe with strong passwords and two-factor authentications. Make sure to implement protocols on changing passwords every 60 days or every time an employee leaves the company.
According to Ron Cresswell, a research specialist, regular backup is the best defense against a ransomware attack.
If you don’t want any interruption in your business operation, make sure to back up your files on a reliable cloud backup system. Choose one that has proven to keep content safe, and the owner only has access to it. Furthermore, make sure that data recovery is accessible at all times.
Do Employee Background Check
Aside from hiring the most qualified person for a position, make sure to do a background check. It is critical to get to know who your employee is before you trust them. You can hire companies that do a background check to make sure that you are hiring someone who doesn’t have a nasty track record.
Use a Fraud Management System
Keep your business protected from scams by using an Enterprise Fraud Management system. It provides a real-time screening of every transaction across the company’s computer, accounts, and channels.
With plenty of fraud management systems, make sure to choose one with real-time activity monitoring.
You can also use adaptive behavioral analytics to detect unusual or fraudulent activities. It can track how people spend money, how they move on the website, and the pressure used when typing on their phones.
Even if you have the best fraudulent management system and the best practices, you can still experience scams. The best way is to avail of insurance.
You can try ID Theft Insurance to help you recover if you are a victim of identity theft. ID Theft Insurance makes it simpler to get back to normal after an attack. Depending on the terms of your insurance, it may notify creditors of the problem and reimburse you for any funds stolen.
Furthermore, you should consider purchasing a fraud-specific insurance policy.
Create Clear Policies
Creating policies for your employees can help them understand the consequences of their actions. They can see the difference between taking home small objects vs. gadgets and what that implies. You can set boundaries and a clear line between things that your employees can and cannot do.
Policies should be to clarify the employees’ conduct and see the difference between theft and fraud. Indicate the consequences for each violation for them to understand.
Keep Record of Everything
It is vital to keep track of everything that goes in and out of your business. It’s one of the best ways to track if fraudulent activities are happening. You can see if something is missing.
You can be sure that not only your inventory is safe, but the money that comes in and out is on track too.
Furthermore, make sure to check on invoices, purchase orders, and payments given to make sure that everything is right and tasks are done before giving payments to employees or contractors.
Create Clear Customer Return Policy
Like writing an employee’s policy, you need to make sure to create a customer’s return policy. Since some returns can be fraudulent activity, you need to post a return policy on your website for your customers to know. With such, you can avoid fraud or unnecessary returns.
You can indicate to your customers to return the item to the place of purchase, get the receipt, and as much as possible avoid cash refunds, particularly for credit card purchases.
Now is the time to protect your business from fraudulent activities. It’s easy putting it off, but the more you delay such prevention, the more that you might lose money or your business. Take the necessary steps to prevent fraud and keep your business safe from future threats.