What You Should Know About Financial Fraud to Protect Your Business?

  • 11 October 2021
  • By MNS

Business fraud refers to dishonest and unlawful practices carried out by individuals or businesses in order to benefit such individuals or businesses financially.

These techniques, often known as corporate fraud, frequently masquerade as legitimate company procedures. Business fraud encompasses a wide range of offenses, including the following:

Charity fraud is the use of deception to obtain funds from people who believe they are donating to a legitimate charity organisation, particularly groups that represent victims of natural catastrophes shortly after they occur.

A fraudulent transaction or exchange that occurs in the setting of an online auction site is known as internet auction fraud.

Non-delivery of merchandise: This is a type of fraud that occurs when a payment is made but the items or services ordered are never delivered.

Non-payment of funds: This is a type of fraud that occurs when products and services are supplied or rendered but no payment is received.

Overpayment scheme: A person is sent a payment that is considerably more than the amount owed, with instructions to deposit the money in their bank account and wire the excess funds back to the person or company who provided it.

The sender’s bank is usually in another country, such as Eastern Europe, and the initial payment is often discovered to be false after the wire transfer has been completed.

Re-shipping scheme: A person is hired to receive merchandise at their home and then repackage the items for transportation, usually to another country. Unbeknownst to them, the goods were purchased with stolen credit cards, which were frequently opened in their names.


Back office and other sorts of financial fraud are on the rise in the United States, and small businesses are particularly vulnerable. The lasting impacts of the crisis, cuts that have weakened financial checks and balances at many organisations, and simple complacency, according to fraud specialists, are all contributing factors.

  • Inadequate pre-employment screening of personnel.
  • Inadequate financial controls in the areas of record-keeping, banking, and cash management.
  • There is an excessive amount of trust. Unfortunately, the same characteristics that make a small firm a pleasant place to work also help burglars succeed.

Billing for non-existent goods or services, creating false suppliers, issuing checks to fictitious businesses, and receiving kickbacks from vendors are all frequent back-office fraud techniques.

According to TD Bank, one of America’s ten largest financial institutions, 75 percent of small business owners are taking at least some precautions to protect themselves from financial fraud. However, the majority aren’t doing nearly enough.

Here are some suggestions for preventing financial theft in your company:

These typically take the form of a bogus email that purports to be from a financial institution or service provider. While the majority are obvious, some have intriguing headlines or appear to be sent from a valid address.

1. Keep your bank balances safe.

If you haven’t already, separate your personal and professional banking and credit card accounts. If hackers get access to any account, they will be unable to access the other, and same goes on. Look thoroughly to your online banking systems to check whether features like automatic logout are accessible.

One should keep a well-planned reimbursement policy for employee expenses. If you provide your employees with credit cards, be sure the card company has fraud protections in place, such as automated alerts if they spend more than a certain amount.

2. Keep your computer systems safe.

Hackers are excellent at breaking into computers. A good firewall and antivirus software can help protect your company’s data and detect security breaches early on. There are a number of well-known cyber-security companies. Establish strict rules that require employees to develop passwords that are tough to guess. Every 60–90 days, employees should upgrade their passwords, and password criteria should be created to assist them in creating strong passwords,” says the report.

Consider backing up your files on a regular or monthly basis and storing them offsite. If your PC crashes, you’ll be able to recover the files you need.

3. A check on Employee background:

Keep important hard copy documents safe as well. Your information isn’t just at risk in the digital world. Your mail, credit card information, and checks can all be stolen by employees and others. Financial statements and other sensitive documents should be shredded or kept in a secure location. Most financial organisations now allow you to completely opt-out of receiving print statements, so keep that in mind.

Photocopiers, too, are dangerous. Anyone may simply pop out the hard disc and access personal information such as income tax and bank records, social security numbers, and medical records once the system has been re-sold.

4. Make use of safe online banking

Online banking is a safe way to manage the money of a small business. Most large banks now offer a variety of online security options. Access to real-time information, account transfers, and payment administration are all available 24 hours a day, 7 days a week. You’ll be able to quickly schedule and monitor payments, and all transactions will be audited. Keep an eye on your account’s activity on a frequent basis. Having fast access to payment records allows you to keep track of your spending and spot any anomalies.

5. Make sure you have adequate insurance.

As property insurance policies rarely cover damages caused by crime or fraud, it’s critical to safeguard against financial losses caused by workplace fraud.

Fraudulent crimes such as robbery, embezzlement, forgery, and credit card fraud are all covered by “Fidelity Insurance.” Money loss coverage (burglary or theft) and employee dishonesty are common liabilities covered by this form of insurance (embezzlement and forgery).


All firms, regardless of their specialisation or industry, are exposed to fraud if they don’t understand how different types of fraud develop. Once you know what to look for, you can get down to business developing more effective security measures and reducing fraud risk in your daily operations.

The sender’s bank is usually located in a different nation, such as Eastern Europe, and the initial payment is frequently determined to be fraudulent after the wire transfer is completed.

A person is employed to receive things at their home and then repackage the items for delivery, usually to another country. The goods were purchased with stolen credit cards, which were usually opened in their names, unbeknownst to them.

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