Access to the internet has certainly brought many benefits in terms of communication, sales, and profits for companies.
On the other hand, the internet possesses a dark side as well, namely, cybercriminals.
In the past few years, malicious attacks have become increasingly popular, causing companies and professionals to lose inordinate amounts of money and to face enormous disastrous consequences.
Fortunately, today we have a variety of effective strategies for preventing this from happening.
Keep reading if that’s something that interests you. In this article, we’ll explain you how to protect your business from financial scams.
Let’s dig into it.
What is a Financial Scam?
If you want to prevent financial scams from taking place, you must first understand what they are and the types of scams that exist today.
Financial scams are forms of theft or larceny in which someone steals money or property in order to benefit from it.
Types of Financial Scams
There are several types of financial scams that may occur. The following are some of the most common types.
Persons who commit identity theft use other people’s information without permission, such as their names, identifying numbers, or credit card information, to commit fraud or other crimes.
Basically, someone impersonates you and steals money using your personal information.
Transaction fraud occurs when an unauthorized transaction is completed using a stolen payment card or data.
Credit and debit card fraud
Credit card fraud involves any fraud committed using a payment card, such as a debit or credit card. It is possible for criminals to use this method to obtain goods or services or to transfer funds to an account that they directly control.
Fraudulent invoices are usually submitted when a supplier (who may or may not be a genuine one) issues a false or inflated invoice for goods or services. Some fraudsters impersonate a genuine supplier in order to request changes in bank account information, so future payments can be diverted to their own account.
The act of embezzlement occurs when an employee or someone else in a position of trust steals money from your company. This money or other assets is then used to benefit them personally.
In general, embezzlement refers to a white-collar crime that involves theft of funds from bank accounts, check forgery, or payroll fraud.
Corporate identity fraud
When fraudsters impersonate legitimate businesses and obtain goods, money, or services by using fake or stolen credentials and/or financial information, they commit corporate identity fraud. Phishing emails, bogus websites, and false invoices can all be used to impersonate a business. Ensure you’re protected from threats by implementing corporate fraud prevention solutions.
Employee fraud occurs when employees steal, alter, or destroy business information (such as customer data) or assets (such as computer software or physical assets) for their own gain.
What Can Be the Consequences of a Financial Scam?
Financial scams can have many consequences that can negatively affect your business on multiple levels. Listed below are some of the most relevant ones.
Financial scams result in a loss of funds. The financial loss is caused not only by fraud, but also by the loss suffered by the business’s clients if they experience a loss, and by the money you will have to spend to fix the problems it causes.
In the event your business is victimized by frequent and large financial scams, the news will circulate around the entire industry. As a result, clients may be less inclined to purchase from you. If the reputation of your brand continues to deteriorate, your business will eventually cease to exist.
A scam involves the theft of sensitive information, such as credit card numbers or names. Therefore, there are also security implications. In possession of such information, attackers could carry out a series of malicious actions that can compromise the security of your business.
There are considerable costs associated with the fight against fraud that go well beyond the direct financial losses. Costs may include assessment, detection, investigation, and response efforts as well as potential restitution.
How Can You Protect Your Business From Financial Scams?
Today, new technologies and some procedures enable businesses of all types and sizes to protect themselves from financial scams of every type. The following are some of the best ways to do that.
1. Check monthly credit cards statements and other bank statements carefully for suspicious transactions
One of the first and most effective ways to protect your business from financial scams is to review your company finances at least monthly.
When reviewing, ensure all invoice amounts correspond to payment amounts and check for missing documents.
If you do this, you’ll surely notice suspicious transactions or movements that may affect your business, and you can act on time to minimize the potential negative impact.
Additionally, conducting random audits or having a third party review books yearly demonstrates to customers and employees your commitment to preventing fraud and deters thieves.
2. Use chargeback management software
If your company accepts online card payments, then you can reduce fraud risk by using chargeback management software.
Chargebacks occur when a credit-card provider requests that a retailer processes a refund due to a fraudulent or disputed transaction.
Customer protection is the ultimate goal of the chargeback process.
You can protect your company by monitoring, logging, and flagging transaction data with chargeback management software. Specifically, it lets you:
- Monitor chargeback rates
- Investigate payments
- Resolve chargeback disputes
- Prevent chargebacks
- Review chargeback rules
The software lets you quickly spot when you’re dealing with suspicious customers.
3. Do not reply to spam or unsolicited e-mails
Each day, you probably receive a large number of emails in your business email inbox.
It is important to be aware that some of these emails may be scams, also called wire transfer scams.
Unfortunately, not all of them end up in the spam folder, which can lead to confusion.
This type of email often contains a suspicious link that takes you to a website where you’re asked to enter sensitive information. If any of these are inserted, then the hackers proceed with stealing money from you and put in danger your business finances.
Because of this, you should not open any email or link that appears suspicious to you. Furthermore, mark them as spam to prevent them from reappearing in your main inbox.
4. Get proper insurance
Crime-related and fraud-related losses are not typically covered by property insurance, so you should guard against workplace fraud.
A business fraud policy covers financial losses caused directly or indirectly by the malicious acts of people you consider to be trustworthy, such as embezzlement, robbery, theft, forgery, or fraudulent orders.
Despite the fact that it may seem like a pointless expense, it can help you recover from financial losses and keep your enterprise in operation.
5. Protect your computer systems and practice web awareness
The majority of business transactions are handled through computers and the internet, making it important to enhance cybersecurity from the start.
So, it’s important to install anti-virus software, update operating systems and browsers, and ensure they’re up to date with the latest security updates.
Additionally, all devices, including mobile phones and tablets, need to be password protected.
6. Use secure online banking
Additionally, you should use a secure online banking system to ensure the safety of your business.
Online banks should ensure safety and security to businesses in many ways. Here are a few of the most important:
- Credential confidentiality
- Multi-factor authentication
- Automatic logout
- Limited liability
- Data encryption
- Account monitoring
If your current online bank does not offer most of these features, then consider switching to one that does.
7. Introduce a robust verification process
Every business deal with a great amount of sensitive data, whether its about employees or customers, such as personal information and credit card numbers.
This type of data is often a breeding ground for thieves and other hackers who want to use it in fraudulent ways.
Implementing robust verification or authentication processes will prevent such situations from occurring and will protect your business from financial fraud.
Authentication or verification is a process that prevents unauthorized users from accessing sensitive information and systems.
These are some examples of common authentication methods that you can implement in your business:
- Password and security questions to secure access
- Biometric authentication (facial recognition, fingerprint scanners, voice identification, etc.)
- Multi-factor authentication
- One-time password
Your business can suffer heavy consequences from financial scams. They can negatively affect your financial stability and reputation.
As presented in this post, there are different types of financial scams, and you can fall victim to one at any time if you do not take the right precautions.
Financial scams can be prevented in many ways, and the most effective ones have been discussed in this article. Following all the recommendations will certainly pay off for you.
I appreciate you taking the time to read this article. Hopefully, it was informative and useful to you.
You can find more information on this topic in this blog post that discusses why make device fingerprinting part of your fraud protection.
About the Author:
Flavia Silipo is a skilled SEO copywriter and digital marketing specialist with over two years of experience. You can find her on LinkedIn.