Best Fraud Prevention Tips for Small Businesses
Businesses are the first target of fraudsters. They can steal money, and information or use the business’s internal means to launder money. There’s so much harm a fraudster can do if a business doesn’t follow the basic fraud prevention tips. Plus, a business can’t protect itself against all types of fraud at once. So what can businesses do to prevent themselves from fraud? Businesses can set up security measures, but cybercriminals and fraudsters are good at adapting to changes. They can quickly find loopholes in the newly set up fraud prevention methods. This is why some of the best fraud prevention tips for small businesses can provide a certain degree of protection.
Specific measures that you take to safeguard your business against hackers, cybercriminals, and ID thieves can save your business a lot of money. Fortunately, new technologies such as online document verification, online KYC verification, and others can act as a shield against potential threats. Before you learn about the best fraud prevention tips for small businesses, you should learn about the common types of fraud.
Common Types of Fraud
There are several types of fraud that a business has to handle. So it makes sense that they’d want to build security measures that cover all possible bases. Here are some of the most common types of fraud:
Identity Theft
In 2021, there were a record 1,862 data compromises in the US, a 68 percent increase since 2020 and a 23 percent increase over an all-time high. According to the same report, over 294 million people had their data compromised in 2021. All of this data points towards ID theft fraud.
Identity theft fraud is one of the most common types of fraud and it impacts businesses all over the fraud. Identity fraud is when a fraudster assumes someone else’s identity and uses that identity to conduct a series of crimes. These crimes include opening a fake bank account and applying for credit cards, and loans.
Wire Transfer Fraud
Businesses of all kinds deal in wire transfers. The huge number of wire transfers makes them susceptible to wire transfer fraud. In most wire transfer frauds, a scammer steals the username and password of the banking customer, and then send the money to their accounts. A famous scammer in Missouri was able to steal $440,000 in wire transfer frauds.
Phishing Fraud
A phishing scam happens when a scam artist uses email, text, phone calls, or any other method to try and steal a victim’s banking details. This type of fraud is often used as the stepping stone for other types of fraud. Fraudsters often use phishing emails to get bank details so they can conduct fraudulent ACH payments and wire transfers.
5 Basic Fraud Prevention Tips
1. Secure Your Bank Accounts
Whenever you start a business, you should make sure to create separate bank and credit card accounts for your personal use and for business use. Let’s say a hacker gets access to your personal bank details, at least your business bank account details will be safe. You should safeguard your bank accounts with security systems that banks use for online banking. You can set up multi-verification for transaction approval.
Create a well-monitored reimbursement policy for employee expenses and follow up on it. If you’re providing credit cards to your employees, make sure that those credit cards have appropriate fraud protection. You can even set up limits per transaction and alerts if an employee spends over a specific amount.
Pay all the bills online so you don’t have to deal with paper bills. The more paper bills that you have to deal with, the bigger the charges of information falling into the wrong hands.
2. Protect Your Computers
Cybercriminals target a business’s computer systems before anything else. Your business computers should be equipped with strong firewalls, antivirus, and other programs that can detect breaches.
Set up strict protocols that require the employees to set up passwords that are tough to crack. Ask your employees to change passwords every 60-90 days, and set password requirements to ensure they choose strong passwords. The files on your computer should be uploaded to the cloud on a weekly basis and stored someplace secure. In case of a data breach, you’ll be able to restore the files without losing much business.
3. Employee Background Checks
While hiring new employees, it’s essential to find people who won’t cause your business harm in the future. Don’t just focus on references and work experiences, conduct a thorough background check.
There are third-party service providers that help verify the employees for you. Most of them charge $30-$50 per employee. This way, you can finalize your list of employees and use the service provider to verify them.
4. Create a Secure Access System
A secure entry system or access system can prevent unwanted visitors from accessing the computers. Some key-card systems provide time-stamped records of employees’ entries and exits from your offices.
Upper-level management can prevent access to some parts of the business complex. Only those who are experts in handling sensitive data can be allowed access to these places. While all this may seem like overkill, it can be helpful in preventing fraud for small businesses.
5. Rely on Technologies
As more and more businesses are creating online environments for their consumers, it is essential to conduct online KYC and AML checks before providing access. Unlike manual document verification, businesses can verify online documents for proof of liveliness. This proof of liveliness includes clicking and uploading a selfie or creating a video dictating words and phrases written on the screen. Online ID verification, online document verification, and online KYC verification technologies can facilitate all these security measures for small businesses.
Bottom Line: Fraud Prevention Tips for Small Businesses
Small businesses already have a tough time trying to scale themselves. Being able to prevent fraud can help them scale quickly and gain more customers. By following some basic fraud prevention tips, they can take care of all kinds of frauds, and detect anomalies early on in the process.
