Fraud can have all kinds of negative effects on a business – it can lead to financial loss, a damaged reputation and increased stress levels for your staff. Nowadays, fraud can come in many different forms from many different directions. Below are five of the most common types of scams committed against businesses and how to defend your company against them.
Card-not-present fraud
When criminals use stolen card details to pay for something online or over the phone, this is known as card-not-present (CNP) fraud. Ecommerce companies are particularly likely to be victims. You can protect your company against this type of fraud by using protective layers of security like 3D Secure (e.g. Verified by Visa or Mastercard SecureCode) on your payment gateway and by always using CVC checks (asking for the 3-digit security code on the card).
Friendly fraud
There’s nothing friendly about friendly fraud. This is when a customer makes a purchase, receives the goods and then demands a refund – either by claiming they never got their goods or that the payment was unauthorised. This is another type of fraud that ecommerce companies get hit hard by, however it’s possible to protect yourself by taking measures like requiring proof of delivery or signatures for high value items or by having a robust refund policy that is detailed on your site.
Personal injury fraud
Personal injury fraud occurs when a customer, employee or member of the public stages an accident or feigns an injury in order to claim compensation. Companies with physical premises such as shops, restaurants and warehouses are often victims, while drivers can also be targeted. Installing CCTV or using dashcams is one of the best ways to protect against this type of fraud – video footage can clearly show what actually happened. If this is not possible, try to document incidents when they occur and collect witness statements.
Internal fraud
Internal fraud is committed by employees or business partners. It can come in many forms from falsifying expenses to skimming cash. There are a few different ways in which you can reduce exposure to this type of fraud. One solution is to separate duties so that no single employee is in control of an entire financial process. Introducing measures like approval limits and dual sign-off can also help. Just watch out for co-ordinated efforts between multiple employees – larger companies with lots of different departments or employee levels are more likely to experience these issues.
Invoice fraud
When a fraudster sends a fake invoice claiming to be a supplier who you trust, this is known as invoice fraud. SMEs to major corporations find themselves falling victim to this type of fraud. To prevent being scammed, always compare bank details to those already on your records – verify that bank details have been changed using a trusted supplier phone number. Train staff to spot red flags like urgent payment demands or subtle email address changes, and check with accounting staff that suppliers have not already been paid for a service.