Protecting your business from fraud

Keeping your business finances safe is an essential part of entrepreneurship. That's why we’re here today to help you navigate the murky waters of financial fraud and phishing by:

1. Breaking down the different kinds of fraud
2. Giving you some actionable advice on how to spot scams
3. Outlining the steps you should take if you find yourself or your business has fallen victim to fraud

As prevention is always better than cure, we’ve also included some top tips at the end of the article on protecting yourself from phishing attempts and common scams. 

Let’s dive in! 

Understanding fraud and scams

Fraud and scams come in many forms, but they all share one common goal: to deceive you and gain unauthorized access to your hard-earned money. 

Common types of fraud

Some of the most commonly seen types of fraud include:

Identity theft 

This is where criminals use your personal information to open accounts or make purchases in your name. They might gather this secure information through data breaches, stolen documents or social engineering tactics. 

Account takeover or hacking

For this type of fraud, criminals gain access to your accounts by using malware or phishing to steal your login details. Once they’re inside your account, they make as many unauthorized transactions as they can, and often change your account details so you can’t login yourself.

Fake investment schemes

Scammers promise high returns with little to no risk, often pressuring you to act quickly so you don’t miss out on their (literally) too-good-to-be-true deal. These scams range from pyramid schemes to fake crypto investment, relying on your trust and optimism to scam you out of your money.

Phishing emails and websites

These kinds of scams are carefully designed to look like legitimate comms from trusted sources, and they aim to trick you into revealing all your most sensitive information. They may also try to trick you into downloading malware onto your device, which will then capture your secure data and share it with the criminals.

The evolution of phishing

Fraud has been around for as long as people have been doing business (seriously - a Greek merchant named Hegestratos committed the first recorded instance of insurance fraud back in 300 BC!).

But more recently, the rise of the internet has led to an explosion in fraud. According to a report by the US Federal Trade Commission, Americans alone lost $10 billion to scams in 2023, and it’s estimated that fraud costs the global economy a whopping $5 trillion every year. That's more than the annual GDP of Japan!

Red flags to look out for

As technology continues to advance, so do the methods of the criminals who exploit it. But by bringing awareness to the patterns of fraud, we can all understand it better and learn how to fight the fraudsters. With that in mind, let’s look at some of the most common red flags you should be watching out for. 

• Unsolicited requests for personal or financial information, especially via email or text message
• Pressure to act quickly or make immediate payments, often with threats or promises of limited-time offers
• Offers that seem too good to be true, like unrealistically high investment returns or unexpected windfalls
• Requests to use unusual payment methods like gift cards or cryptocurrency for what looks like an otherwise normal transaction
• Poor grammar, spelling errors or unprofessional communication from allegedly official sources like banks and businesses

What to do if your business has been scammed

Discovering the evidence of a scam, whether it’s a suspicious transaction, an unfamiliar app on your device, or changed passcodes on your secure accounts, can be very alarming. Swift, strategic action is the best way to proceed. Here’s what to do:

#1. Assess and contain the damage

• Immediately stop any ongoing fraudulent transactions or activities
• Identify which systems, accounts or data have been breached
• Change all your passcodes and access codes, even for those accounts that don't seem to have been affected
• If possible, isolate affected systems to prevent further damage

#2. Gather and preserve evidence

• Document everything related to the fraud, including dates, times and all details of any suspicious activities
• Save all relevant emails, documents and transaction records on a different device
• Take screenshots or photographs of any digital evidence you have 
• Avoid altering or destroying any potential evidence, as it could be crucial for an investigation later on

#3. Report the fraud

• Contact your local police and file a report
• Report the incident to your local fraud prevention body too. For example, if you’re in the UK, you should report any incidents to Action Fraud. If you’re in the EU, you should report any incidents to OLAF. 
• Inform your bank or financial institution immediately if any financial accounts are compromised 

#4. Notify relevant parties

• Inform your insurance company, as some policies may cover fraud-related losses
• If any of your customer data has been compromised, you may need to notify affected individuals and relevant data protection authorities
• Where appropriate, inform your key stakeholders, such as the members of your board or your major clients

#5. Seek professional advice 

• Consult with a lawyer who specializes in business fraud to understand the legal avenues open to you
• Engage a forensic accountant to assess the full extent of the financial damage
• Consider hiring a cybersecurity expert if digital systems were compromised 

#6. Review and strengthen security

• Conduct a thorough review of your business’s security protocols
• Implement stronger fraud prevention measures where needed, such as enhanced verification processes or improved cybersecurity systems
• Provide your team with extra fraud prevention training to help them recognize and prevent fraud before it becomes an issue

#7. Develop a recovery plan

• Create a strategy to address any financial losses
• Plan how best to manage any reputational damage your business might have suffered
• Consider how to rebuild trust with your customers, partners and stakeholders 

#8. Learn and adapt  

• Analyze how the fraud occurred in the first place and what vulnerabilities it exposed
• Use these insights to improve your business processes and fraud prevention strategies
• Consider regular fraud risk assessments, either using software or by hiring a risk assessment consultant. Companies like PwC, Forensic Risk Assessment offer this as a service.

Tips on protecting yourself and your business

Phishing and fraud attempts are becoming ever more sophisticated, but you can outsmart most of them with these precautions:

• Be cautious of unexpected emails - Check the sender’s address carefully. Scammers often use addresses that look similar to legitimate emails but with slight variations (e.g. instead of joe.bloggs@realcompany.com, the scam email address might be joe.bloggs@realcompanie.com). 
• Always hover over links before clicking them - This will reveal the true destination of the link. If it looks suspicious in any way, don’t click. 
• Be way of urgent email requests or threats - Legitimate businesses won’t pressure you to act immediately via email. 
• Look for personalization - Phishing emails often use generic greetings like “Dear Sir/Madam” instead of addressing you by name.
• Always use strong, unique passwords - Consider using a password manager like LastPass to help generate and store complex passwords securely. 
• Enable 2FA whenever possible - This adds an extra layer of security even if your password is compromised.
• Keep software up to date - This includes your operating system. Updates often include important security patches that help keep you safe. 
• Be cautious on social media - Scammers often use social media to craft more convincing phishing attempts. 
• Use official apps - This is especially important for your banking apps. Always download apps directly from official app stores and double-check the app name against the bank’s website. 
• Educate your team - If you’ve got employees, make sure they’re aware of these best practices, and your company’s security policies. 

Final thoughts

Remember, the quicker you act, the better your chances of minimizing damage and recovering your losses. Don’t let embarrassment prevent you from reporting fraud either, as speaking up could help to prevent other businesses from falling victim to the same scam.

By following these guidelines and staying vigilant, you’ll be well-equipped to protect your business from fraud and phishing attempts. Remember, if something feels off, it’s always better to err on the side of caution. Reach out to us at support@wamo.io for more guidance.