Whether you started your small business recently or have been in the game for a while, you worked hard to get where you are today! Now, it’s time to protect your investment by avoiding fraud. A basic understanding of some common business scams can help you achieve this. Through educating yourself, you’ll be able to better identify when something is amiss.
5 common small business scams you should know about
1. Ransomware and email compromises
Many consequences can arise out of an email compromise. Large payments to or from the business can be diverted to a scammer’s account, critical private information can be stolen, and other employees within the business may end up getting scammed.
With a ransomware attack a company's entire network can get hijacked by criminals. Even if the business pays the ransom, there is no guarantee the bad guys will keep their word and unlock the business’ network. Many businesses have paid well over a million dollars to ransomware scammers. In fact, a 2020 cyber security survey revealed that nearly 70% of U.S. organizations have experienced a ransomware attack and paid a ransom as a result.1
It's important to educate you and your employees on the signs of phishing emails or ransomware and have procedures in place if they are discovered. Doing so will help you avoid a costly situation.
2. Workplace posters
You may receive a notice in the mail claiming you need to purchase posters to comply with federal or state labor laws. Often, scammers will try to scare you with the possibility of incurring large penalties for failing to display these posters. Their scam depends on you, the recipient, not doing your due diligence and researching the matter further.
The Occupational Safety and Health Administration (OSHA) does require employers to display a poster in the workplace detailing workers’ rights. But these posters are available for free on OSHA’s website. Refer to the OSHA and U.S. Department of Labor’s websites to download digital copies of any workplace posters you’re required to display.
3. Fake invoices
Some scammers will disguise a solicitation for a product or service as an invoice and demand payment – despite the fact you never placed an order. You can avoid falling victim to these scams by reading the fine print on any suspicious invoices you receive, as the fine print may acknowledge it’s a solicitation. Also, you should be familiar with all the billing processes associated with your business. If an invoice isn’t a part of these normal processes, you’ll know something is fishy from the get-go.
4. Business email compromise (BEC) fraud
BEC fraud has resulted in more losses than any other type of fraud, according to the Federal Bureau of Investigations, accounting for an estimated $1.77 billion in losses in 2019 alone.2 This method is typically used to target the individual(s) at an organization responsible for paying bills. The scammer will send an email posing as a vendor and request the recipient to wire them money, divulge personal information, or even buy gift cards.
5. Business identity theft
Business identity theft is sometimes referred to as “B2B fraud” because it’s the process of one company using another company’s identity for financial purposes, such as to take out a loan. Sometimes, a scammer may even hijack your branding – going so far as to create fake websites – to impersonate you and defraud unsuspecting visitors. The latter can not only take away business from you, but also hurt your reputation. If you discover you’re a victim of B2B identity fraud, report it immediately to your financial institution.
Along with educating yourself and your employees on common business scams, another great way to protect your business is to research any suspicious emails, letters, or calls that come your way. The internet is a fantastic resource to confirm the authenticity of any correspondence you’re unsure of. If you’re a business member of General Electric Credit Union and fall victim to a scam, call us right away. We’ll take the necessary steps to protect your business accounts.