4 most common financial frauds that can affect any business
It’s difficult enough to run a business when everything goes perfectly. When you’re an entrepreneur, though, the unexpected occurs. You must be prepared for every eventuality that may arise, including fraud. Fraud in the workplace isn’t as uncommon as you would believe.
Financial crime has swiftly become a major issue in a variety of businesses. Financial crimes cost surveyed companies an amazing $42 billion every year, according to PwC. Financial crime is a severe issue that all financial institutions must address.
Financial fraud happens when you are defrauded of money or other assets through deception or other illegal action. While knowledge is the best first line of protection against being a victim of financial fraud, it isn’t always enough. Many small businesses lack technological protection like NICE Actimize fraud monitoring analytics that is used to secure their data and consumer information from increasingly sophisticated criminal operations.
Common types of financial fraud
Scammers are always coming up with new methods to take your money. Here are four prevalent forms of financial fraud and their related warning flags.
Identity theft is one of the most well-known kinds of financial crime. When someone uses another person’s identifying information without their consent, this is known as identity theft. Fraudsters might hijack your company’s identity and use it to access your credit, financial statements, bank statements, and your federal tax identification numbers.
Maintain the security of your statements and sensitive information to avoid identity theft. Make sure your usernames and passwords are tough to guess and avoid phishing frauds. If employees misplace their paychecks, fraudsters may access your company’s bank account.
Paychecks are extremely sensitive since they contain your company’s routing and bank account details. Paying employees via direct deposit is another option. You transfer the employee’s pay directly into their account through direct deposit. You won’t have to give out checks containing sensitive information this way.
Cash fraud can occur without you or the consumer being aware of it, and counterfeit money is useless when you go to the bank to deposit the cash. High-value banknotes, such as $100 bills, are the most commonly counterfeited. If you accept counterfeit money, you will not gain any income from the sale.
Learn how to identify whether money is phony to protect your small business from money fraud. Raised printing, microprinting, watermarks, and color-shifting ink are all elements that should be visible on lawful cash. Also, instill in your personnel the habit of double-checking currency before accepting it.
Theft committed by workers or other trusted company partners is known as embezzlement. It generally entails diverting cash from a firm to make an illicit profit. It can, however, involve merchandise theft, office property theft, and even data theft. Embezzlement can range from sophisticated fake accounting and bookkeeping schemes to illegal financial transfers to simple property or small cash theft.
Embezzlement can be a significant felony depending on the act’s scope and the amount of money or assets taken. While it’s unpleasant to believe that your employees are stealing from you or plotting to steal from you, it’s an awful reality for which business owners must be prepared. Embezzlement has the potential to wreak a lot of damage and has been connected to more than 30% of all corporate bankruptcies.
Small firms have twice as many payroll plans as huge corporations. Payroll fraud can manifest itself in a variety of ways at your company. Employees may request wage advances but fail to repay them.
Employees may also falsify timesheets by lying about the number of hours they worked. Employees might even have coworkers clock in for them if they cannot do it themselves. Payroll accounts should be audited so that you may detect fraudulent activity early.
Consider utilizing payroll services so that you may approve payroll before paying employees and keep track of their pay rate and hours in one place. Don’t wait until your company has disbursed large quantities of money to start keeping track of things.
Stay proactive and alert
Criminals frequently target successful businesses since their owners juggle several obligations and may miss the warning signs. You work hard for your money, and it is yours to keep. By paying strict attention to all financial activities, you may help safeguard your company against fraud. Strong fraud detection systems may also go a long way toward assisting you in being watchful against these dangers.