How Fraudsters Can Ruin Your Business

The Association of Certified Fraud Examiners (ACFE) found the cost of fraud across businesses worldwide of all sizes was a median $150,000, with an average five per cent revenue loss per organization.

Fraud can range from simple internal misdemeanours such as claiming for time not worked to major financial thefts both in terms of money and goods. Fraud isn’t confined to larger organizations either: indeed, the ACFE found smaller businesses are just as vulnerable to fraud as larger ones.

Tech is a mixed blessing

Ironically, the march of technology makes fraud more prevalent due to electronic systems being compromised such as the wrong people getting access and similar. There again, tech is helping to combat fraud such as the use of the latest anti-fraud techniques to make certain established business methods such as check generation and payment more secure.

Still, it pays to be aware of the nature of the threat in front of you. Fraudsters can wreak havoc and even ruin your business in various ways:

IT fraud

Much personal and financial information is now digitized and this is a gold mine to fraudsters who can use this data to create fake IDs, steal money from bank accounts, clone credit cards and much more.

If fraudsters have accessed a company’s IT system, it can take some time to recover with a commensurate loss of productive business time and quite likely a financial cost in terms of lost revenue, maybe loss of customers, cost of perhaps paying experts to get the IT set up back on its feet and more.

ID theft

Mentioned above as one objective of IT fraud, ID theft from organizations holding customer data is especially popular. Even basic name and address records are useful to fraudsters for creating fake IDs - especially so if other sensitive data is accessed such as contact information, credit card numbers and bank details.

Theft - or even just compromising customers’ data - can severely disrupt an organization so affected and, in larger profile cases, the loss of trust can take years to recover.

It’s often the presence of a weak system security, coupled with inadequately trained staff, that can let the fraudsters in.

Card and cash fraud

E-commerce is especially vulnerable to credit card fraud as many transactions take place through ‘card not present’ (CNP) payments.

This form of distance selling can be taken advantage of by fraudsters using stolen or cloned credit cards and is notoriously difficult to detect: remarkably, the average CNP fraud transaction in the US was worth $403 in the first quarter of 2019 - close on twice the value of the average legitimate transaction. Credit card cloning has reached levels of sophistication so making face to face sales open to fraud too.

Cash transactions are vulnerable to fake currency use - it’s estimated that some $70 million in forged bills are in circulation throughout the US.

Along with faked payments, losses can be exacerbated when change is given in genuine cash in exchange for forged currency.

Payroll and ‘time thieves’

Payroll fraud at its most basic is employees or maybe outside contractors claiming payment for hours they haven’t actually worked. A few extra hours erroneously claimed here and there may not sound much, but in larger organizations with scores of workers filling in time sheets this can add up if many staff are claiming hours they’re not entitled to.

Vigilance is key

Much fraud starts with weak security both in terms of the setup of a system- for example, a poor password regime - and staff not aware enough of fraud risk.

The first can be dealt with through better security procedures - and the second through improved training and follow up. Fraud techniques evolve as tech changes: for example, phishing email fraud is now prevalent in business environments whereas previously it was confined to the consumer market.

Fraud certainly poses a major and ever-changing risk to business.