What Is Fraud?
Unfortunately, fraud can take on many forms. Some might seem obvious, but others are pretty hard to spot, especially to the untrained eye. And sometimes, it can come from inside your own company.
For example, theft by employees is a common source of internal fraud – from lost inventory to unethical accounting practices, or the theft of actual financial and physical assets.
Externally, potential sources of fraud are much broader. External fraud may come in the form of counterfeit bills, bad cheques, or the use of stolen credit cards. For businesses with a retail component, false returns can also be a problem. There are anonymous threats, such as computer hacking, scam callers, and information theft from outside sources.
Types of Scams That Can Affect You
The Competition Bureau of Canada lists a number of the most common anonymous scams you and your business should be aware of, including:
- Business grants and loans scams
This type of fraud usually takes the form of a website claiming to be a government department helping small businesses get “special access” to grants and loans for a fee. The first thing to remember here is that government departments or agencies do not charge for services and information to help you apply for government grants and loans.
A seemingly legitimate business directory supplier contacts you to confirm your address and contact information. Then you receive a second call to “confirm” that you have agreed to purchase the directory listing and, a few weeks later, you receive an invoice for several hundred dollars for online advertising you never agreed to buy. They say they have a recording of you agreeing to the services and threaten to send your file to a collection agency if you don’t pay.
This scam is when you or your buyers receive a message from someone claiming to be your regular provider of specific office supplies. The scammer might imply there is a government requirement for you to replace an “expired product” and that you could face a fine if you don’t comply with the requirement. They then request that future payments for supplies be made to a new account.
- Intellectual property renewal notice scams
In this form of fraud, you receive a letter or an email that looks like it is from the Canadian Intellectual Property Office (CIPO). This message pretends to be a government reminder that your company’s intellectual property (IP) rights must be renewed. The instructions are for you to pay a specific amount to renew them.
See a comprehensive list in The Competition Bureau’s Little Black Book of Scams for more examples of fraud.
How to Protect Your Small Business Against Fraud
You can do many things to mitigate the chances of becoming one of the many companies every year in Canada that fall victim to fraud. Here are a few tips:
- When hiring, do background checks and call references
- Be cautious and skeptical of unsolicited calls
- Conduct surprise internal audits
- Keep good records and practices
- Create a fraud policy and educate yourself and your staff
- Clearly define procedures for verification, payment, and accounts
- Inspect all invoices before paying anything
- Watch for anomalies, such as larger than average orders
- Make sure you are protected with the right insurance, such as cyber liability coverage
- Use verification codes with credit cards or gift cards
- Keep up on the latest fraud trends and news
How to Get Help or Report Fraud
Sometimes our best efforts still aren’t enough. If you suspect you are a victim of fraud or receive threatening or abusive calls from collections agencies, contact your local police or the Canadian Anti-Fraud Centre.
You can also call 1-800-O-Canada (1-800-622-6232) for general information on Government of Canada programs and services. Read more about how to report fraud and scams in Canada, and don’t forget to contact your insurance broker if you need to file a claim or are unsure what type of coverage your small business needs to be adequately protected.