Businesses can be victims of fraud as easily as they can be perpetrators of fraud. Given that companies typically have more substantial resources than individuals, there is good reason for those engaged in fraudulent activities to target a business rather than an individual.
Being able to recognize some of the more common forms of business fraud can help you train your staff members to avoid falling victim to these forms of fraud. It can also help you catch early warning signs that someone working for you is using their position to defraud others.
Non-delivery of merchandise or non-payment of funds
Individuals or other businesses trying to get paid without delivering goods or receive products without paying for them are among the most common forms of fraud that could affect your business.
Vetting anyone that you use as suppliers is important, as are contracts with those that you buy from and those who purchase from you, especially on credit or with a payment plan. Validating an individual’s identity, confirming a business’s information and putting all of the terms of your agreement in a written contract are steps to help you avoid this kind of financial fraud.
An individual or organization may try to solicit donations from your company. Verifying their legal status and whether or not they are a real non-profit or charitable organization before offering money, goods or donated services can protect your business from losses and possible tax issues.
Wire fraud can be one of the more insidious forms of financial securities. Someone with inside information about your company might reach out to accounting and convince them to send a wire, possibly by impersonating a business employee. Once the bank releases the wire transfer, it is almost impossible to track or recover the funds.
Someone who doesn’t owe your company might send payments to your business. Otherwise, an individual or company that legitimately owes money might send more than they should. They provide you with details about how to send back the overage, only to recall or cancel the payment that they made, making this a common and particularly sneaky subset of wire fraud.
Your business should take care to have written contracts with those that it deals with, to verify the identity of suppliers and to otherwise watch out for signs of fraud. Not only could your company lose money in a fraudulent scheme, but you could wind up implicated in white-collar crimes perpetrated by another person or company.