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Types of business scams

Julianne Leybag
21 February 2018 3 minute readShare
Security, data, digital

Business owners can become ‘easy prey’ for fraudsters—possibly endangering the business once successfully lured into various scams. My Business discusses some of the most common types of business scams to watch out for and how to avoid them.

If a business falls victim to a business scam, it could have serious implications to one’s business. These scams could completely draw out business funds and destroy the business.

There are several kinds of scams that business owners need to be wary of, but a select few—such as those listed below—stand out due to the sheer damage it can cause to an organisation.

Some scams that business owners need to look out for are the following:

  • Consumer fraud
  • Intellectual property theft
  • Cash larceny
  • Financial statement scam
  • Invoice scam
  • Cryptocurrency scam

Consumer fraud

Consumer fraud is an umbrella term for individual-targeted scams, such as Ponzi schemes, malicious calls, pyramid scams, phishing, fake telemarketing, fake tax returns, licensing scams, and business systems breach.

Businesses are especially vulnerable to email phishing scams involving fake emails that contain malicious links that could destroy the internal system of a particular business.

Learn more about outsmarting online scammers here.

Intellectual property theft

Businesses that rely heavily on trade secrets and other sensitive information could be subject to intellectual property (IP) theft if proper security measures aren’t put into place. If an employee who is party to the business’ trade secret decides to leave the business for good, there is a high chance of that employee spilling trade secrets to a competitor, spelling possible disaster for the business.

Business owners should have the foresight to protect sensitive IP information and prevent IP theft from the beginning by drawing a binding agreement between an employee and the business. Learn more about avoiding business scams here.

Cash larceny

Also known as cash skimming, cash larceny is categorised under asset misappropriation. This occurs when an unauthorised individual collects cash meant for the business before the cash enters the business’ system.

Since it involves tracking something which has not yet been recorded as far as the business is concerned, cash larceny can be hard to uncover—often getting discovered way too late.

Other scams under the asset misappropriation category include tampering with cheques, payroll and inventory scams, skimming from accounts receivables and reimbursement scams.

Financial statement scam

Financial statement scam, when left undetected, could cause the most damage to a business than any other kind of fraud. Simply put, a financial statement scam is the misrepresentation of a business’ financial state by deliberately omitting certain amounts in a company’s financial statement.

This kind of scam can range from overstating profits and assets to deliberate concealment of assets.

Learn more about reclaim scams here.

Invoice scam

Invoice scams usually involve sending fake bills or invoices to a business who will then unsuspectingly pay the fake invoice. These fake invoices look very professional and legitimate.

If a victim starts paying these invoices, it is highly likely for the scammer to continue sending these fraudulent invoices for several months until the business loses more and more cash.

Invoice scams are particularly hard to discover since these invoices require incremental payments—usually it is discovered too late. These small, incremental payments can amount to a hefty sum and cause a significant cash loss to the company.

Learn more about middleman scams here.

Cryptocurrency scam

While cryptocurrency seems like a secure way for businesses to manage and secure their funds, businesses are still vulnerable to cryptocurrency scams. Business owners should properly educate themselves on the implications of incorporating virtual currencies into their business.

There are several kinds of cryptocurrency scams in the technological sphere. Some of the most common include fake cryptocurrency exchanges, fake Bitcoin cash wallets, Bitcoin pyramid scams and pump and dump schemes. The recent rise to fame of Bitcoin has conversely prompted more and more scams to infiltrate the industry—which is why it is best to trade only on trusted platforms and avoid overly-enthusiastic Bitcoin pitches.

Learn more about crypto scams here.

All kinds of businesses are susceptible to all kinds of frauds. But if business owners cover all bases and scam-proof their business, the chances of the business falling into these scams are highly unlikely. For added security, consulting a professional could be the best way to go for your business.

Types of business scams
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Julianne Leybag

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