Each year, businesses in every industry fall prey to business scams. Scammers have become so savvy that often their scams are undetectable from actual business opportunities or requests for service. Business scams can drain a company’s financial resources, but there are other, possibly more impactful, negative effects, including the damage they can bring to a company’s reputation.
Learning how to identify and report business scams can be a formidable challenge for businesses. Many business owners may not keep up to date with all of the new ways scammers try to harm businesses. Scammers often disguise their true identities to avoid being caught, masking themselves or pretending to be someone else to achieve their goals.
Here, we will delve into how to identify and report business scams to the proper authorities before they damage your business reputation.
What is a business scam?
The first step is to define what constitutes a business scam. Scams can be found within legitimate websites, or entire websites can be scams. Shifty characters seeking to destroy your business or finances can claim to offer “free” business listings to get your information. They can impersonate a government agency or claim they can remove negative business reviews for a fee. Fraudsters often use phishing scams, which involve impersonating a trusted individual, such as a bank, to trick a business into revealing sensitive information.
Scammers use tactics such as pressure and urgency, demands for information with threats of legal trouble, or odd requests for money, such as wire transfers or buying gift cards.
When working with other entities as a business owner, one thing to remember is that if it sounds too good to be true, it probably is.
Business scams are widespread, with the FTC reporting over 2 million scam reports per year. Businesses must remain vigilant of misconduct and learn to file a complaint should they receive a suspicious communication or a fraudulent phishing attempt.
Detecting online business scams
So, how do businesses protect themselves from the litany of scams? First, it’s essential to remain educated about the various types of scams and how they evolve. Pass this education on to your business team so they are also aware of the many ways businesses can fall victim to scams.
Keep a close watch on the financial activity of your business. If a scammer accesses your bank account, you want to be aware as soon as possible and issue a complaint directly to the agency that handles financial scams.
Also, I work with reputable partners. Get to know the people you are doing business with and ensure that these partners and vendors comply with regulations and laws before sharing sensitive information.
Make sure you have implemented internal protections, such as two-factor authentication, audits, and regular data analysis. It also helps to separate financial duties, so all of your financial eggs are not in one basket in case of an attack by scammers.
Finally, a system that allows for “whistleblowing” or reporting in-house so employees and partners can report business scams anonymously should be implemented.
Reporting business scams
There are many ways that a business can report suspected or confirmed scam activity. The first stop should be the Federal Trade Commission (FTC), which handles consumer complaints and issues related to business fraud, and can be contacted at reportfraud.ftc.gov. If your business involves financial products, you will want to turn to the Consumer Financial Protection Bureau (CFPB), which handles complaints about financial services and products.
State or local law enforcement can also help when a business falls victim to a scam. Each state has its own office for handling scams and fraud, and local police can also help with criminal cases.
Protecting your business’s reputation
One of the most significant concerns of businesses that get scammed is the possible damage to their reputation. Once a business’s reputation is wiped out, it can be challenging (if not impossible) to get it back.
When you identify that a scam has occurred, respond immediately. Be transparent with your team, customers, and trusted vendors when the fraud occurs. Additionally, you will want to inform affected customers immediately and let them know that the business is on top of things.
Once the scam is identified and responded to, make sure to shore up the business’s anti-fraud protections so a similar scam does not happen again.
While scammers are more sophisticated than ever, so are the protections available. Businesses can lose more than money when a scam happens — their reputation can be irreparably damaged. By promptly responding to scams and fraudulent activity and implementing effective protections, businesses can effectively guard against financial and reputational loss.