Fraud is an acknowledged and common problem, but most business owners assume it is something that threatens the elderly, or the ignorant, and not their own company. The sad truth is that everyone can be a victim and many companies have taken significant losses from a variety of scams. We look at some of the most common scams and tell you how to avoid them.
Government Loan Scam
Start-ups often require loans, and the Canadian government has numerous grants and offers that the new business owner can apply for. Fraudsters have been known to set up websites online in which they either offer help applying for such loans for small and medium-sized businesses, or which masquerade as government departments. This mimicry extends to the name of the website, logos and even the Canadian flag, but these sites have absolutely nothing to do with the government.
Services and information provided by the government are always free of charge and loans are never guaranteed. A major red flag for potential fraud is where a private entity is offering a guarantee for a government loan, or incentive, for a fee. No private company is ever involved in the approval process for government loans and incentives.
While searching online the advice is to always be skeptical. Examine details closely before signing up for newsletters, emails, or giving over banking, or personal details. The easiest way to avoid being caught is to look for your information directly from the Canada Business Network or by calling 1 800 O-Canada (1-800-622-6232) for general information on Government of Canada programs and services.
False Sales Scam
New employees, or those employed in junior roles, are often the first targets for fraudsters. Often, they will target junior staff in your purchasing departments and explain that they are long-established suppliers who are looking for a signature to simply renew a contract. A mere formality in a process that has been completed many times before. Occasionally, they will call claiming to be from a genuine supplier that you use and explain that your company needs a service or product as per “new government legislation”.
The junior employee may be targeted for information, as the scammer will prey on lack of experience, or training, to get a foothold into the company. That employee will be asked for their manager’s names, bank details, addresses, email, in addition to other sensitive information. The information will then be deceptively used to convince another employee that contracts have already been agreed to and all they need is a signature.
Sometimes these scams come with what appears to be a real offer. A scam may provide an offer to deliver a free set amount of paper to the office, the clerk signs for delivery, and only later finds out that they committed to monthly paper deliveries at ridiculous costs.
Employees need to be trained to carefully read all documents and contracts they are sent to be signed. Often what a scam may claim is a simple confirmation of company details, may hide expensive year-long purchase agreements in the fine print. Employees should also be asked to scrutinize contracts and take the time to verify details with experienced staff, before responding, if an employee is uncertain of a procedure or what information should be provided in routine situations. Contracts should be executed by the appropriate manager, and not on a first-time call from an “old supplier”, and old supplier would know the appropriate phone number to call.
Employees should never allow themselves to be rushed; should not be afraid to hang up on a caller; should take the time to phone their usual contact at a supplier, and/or ask to see previous versions of service and supply contracts.
The Fake CEO
In an era of information, it is extremely easy for fraudsters to get hold of the name and email address of your CEO, impersonate them, and contact financial employees to demand a financial transfer. Even more common is when they phone and pretend to be the CEO of a large supplier who is irate and demanding a recent invoice be paid immediately.
These scams rely on the politeness of your employee and their fear of ruining established relationships. Employees need to be trained to be confident enough to speak up and demand proof that they are indeed speaking to who that person is claiming to be. Companies should also limit the amount of information that is available online. Do not mention suppliers on your website, even if they are good partners, and where feasible, only list online the names of the most senior executives of your organizaiton.
Also, look closely at where individual demanding payment has requested the money to be transferred. A huge red flag is if the scammer wants payment via an untraceable system such as Bitcoin or gift cards.
At the end of the day, avoiding scams and beating fraud is about doing your due diligence. Those with the power to pay accounts and deal with suppliers should always be empowered to ask questions of anyone they deal with, phone suppliers, and even challenge the CEO. They are only doing it for the good of the company.