May 11, 2020 – The Better Business Bureau warns against scams that target small businesses in a press release. Scams can impact every business, regardless of location, size, or industry. Nevertheless, small businesses are often more vulnerable to fall victim of fraud due to their lack of cybersecurity support, or established accounting processes. The BBB Business Tip introduced the most common scams small businesses fall for. After all, knowledge is the best protection against scammers.
Businesses receive fake invoices demanding payment for products or services never ordered or delivered. The most common scams involve office supplies, website or domain hosting services, and directory listings.
Often, the invoice contains a fine print that identifies the bill as a solicitation. Generally, the amount is small enough to not initially raise a red flag.
Business email compromise (BEC)
Business email compromise (BEC) fraud is an increasingly common cyber risk that uses spear phishing techniques that typically targets people who pay bills in businesses, government, and nonprofit organizations. These rogues use social engineering methods to launch a doppelganger campaign most of the time impersonating the CEO, another executive, or another trusted source like a known vendor of the targeted organization to give their delivered instruction legitimacy.
BEC fraud often results in significant losses due to wire transfer scams. The email asks the business to wire money, buy gift cards, or send personal information, often for a plausible reason. If money is sent, it goes into an account controlled by the con artist.
Read more: Combating BEC fraud
This kind of fraud was the number one on the Canadian Anti-Fraud Centre’s (CAFC) list of frauds affecting Canadians ranked by dollar loss. That means no other fraud tactic was as profitable for fraudsters as spear phishing in 2019 with a total loss of $21,404,827.08.
Office supply scams
Office supply scams work similar to BEC scams, except that fraudsters most of the time call the businesses on the phone. Businesses receive an unexpected telephone call from someone claiming to represent a reputable company with which the firm often does business. Sometimes scammers will even call in advance to find out what brand of supplies or equipment the business uses.
The scam caller will try to sell the business surplus merchandise at a reduced price, citing a cancellation or over-order by another purchaser. However, the merchandise doesn’t exist.
In the directory scam, con artists attempt to fool businesses into paying for a listing or ad space in a non-existent directory. In some cases, the directory will technically exist, but won’t actually be distributed to potential customers.
Other times, the scammer might lie about being with a legitimate directory, such as the Yellow Pages. Either way, the business is billed hundreds of dollars for listing services they didn’t agree to or for ads that were never placed.
Phishing scams targeting small businesses
Phishing scams attempt to steal sensitive information about their targets. These scams often appear to be legitimate emails or text messages. The CAFC explains that those scammers impersonate legitimate companies or another known sender such as a client or a boss by email or text message. Emails often request login credentials, personal or financial information to rectify ‘urgent problems.’
However, when clicking on the link, it starts a download of a virus that captures personal information or loads a form that asks for bank account or credit card details.
Read more: Stay cautious about phishing scams
The BBB advises businesses to be leery of unsolicited messages and to not click on links. Instead, they recommend hovering over the link with the cursor to see the real address. Additionally, the BBB encouraged to check computers for their proper firewall and computer protection software.
Vanity award scams
This con typically targets business owners through email campaigns. The scam email congratulates the owner on their selection for the award and invites them to click a link for further details on how to claim the prize.
However, claiming the honor involves paying a several hundred dollar fee. The BBB advises to always research the organization offering the ‘award.’
Small business operators are often approached to participate in coupon book promotions. The business offers discounts or extras in the coupon books that are sold by promoters to consumers.
Problems occur if the promoters change the terms of the coupons, oversell the books, or distribute them outside the company’s normal business area.
The BBB recommends to make sure the coupon book is being promoted by someone trustworthy, and that the terms and conditions are clearly spelled out.
Overpayment scams come in a huge variety, hence they are very hard to detect for sellers. Not only service providers are targeted by these fraudsters, anyone selling goods should be suspicious of any cheque, especially if it is for more than the agreed selling price. In this scam, a client sends a check for more than the amount they owe. Then, the client instructs the business to wire the balance back to them.
In another scheme, the bogus client sends a check and tells the business to deposit it, keep part of the amount for compensation, and then wire the rest back. The scammers use a range of excuses to explain the overpayment, but any such excuse should be treated with the highest level of suspicion. Particularly sellers of high-priced items using online ads such as craigslist are affected.
In addition to the lost money over the fake cheque, the seller may have already sent the item that was for sale to the fraudster. The results are the same: the check eventually bounces, and the seller is stuck, responsible for the full amount, including what they wired to the scammer.
To avoid losses to fake cheque scams businesses are advised to never accept cheques that are more than the agreed amount of money or consider alternative payment methods, and ultimately, if the situation seems suspicious to find another buyer.
Most businesses are regularly asked to donate funds to charitable causes. While many requests are legitimate, every year small businesses become victims of fraudulent or deceptive charitable solicitation schemes.
The BBB recommends to carefully research the charities before making a contribution.
Scammers often pretend to be a legitimate company in order to trick consumers. Scammers set up fake websites and ‘hijack’ a regular company name and address. They may also use brand hijacking – the blatant copying and misuse of company logos and website content – to impersonate a business and deceive unsuspecting visitors.
In this con, the company doesn’t necessarily lose money. However, their reputation is tarnished when angry customers who were ripped off by scammers think the real company is responsible.
How to avoid small business scams
The BBB suggests small businesses keep good records of all orders and purchases to protect themselves. This will help to detect bogus accounts and invoices. The consumer protection association also warns businesses to be careful of what information they share.
Furthermore, smaller businesses are advised to be extra careful with payment procedures and to establish payment authorization procedures, including a multi-person approval process for transactions above a certain dollar threshold. It is advisable to avoid some payment methods altogether such as wire transfers, pre-paid debit cards, and gift cards. They are scammers’ preferred methods of payment. Moreover, the BBB recommends to double-check vendors and to make sure that the business the invoice comes from is a familiar company.
Cybersecurity, proper computer protection software, and a firewall are essentials for every business to protect themselves from online rogues. To avoid catching malicious software or viruses, businesses are encouraged not to click on links inside unsolicited e-mails.
Most importantly, the business employees have to be educated about the current scams and how to avoid falling victim. Businesses and their employees should make sure to stay informed about the common scams and report them if your business is targeted.
Marina Burghard writes for Canadian Fraud News about fraud-related cases, whistleblower, jurisdiction, identity theft, consumer protection, etc. – essentially about scams and how to protect yourself against this kind of fraudulent criminal behavior. She holds a Master’s degree in Political Science where her interest in criminology grew. Besides fraud, Marina’s scientific interest lies in terrorism, extremism and how to deal with it as a society.