Your HTLF fraud partners, Director John Fick, and Fraud Risk Manager Tracy Swaim, along with their teams, work daily to help prevent and mitigate fraud loss for our clients. Now more than ever, small businesses are at an increased risk of fraud. Due to Covid-19, inflation, and rising interest rates, some small businesses are forced to work on a skeleton crew, meaning fewer eyes looking for potential scams. Falling victim to fraud can cost your business precious resources including time and money. Learn more in our latest article about what you can do to help protect yourself and your business.
According to the FTC, reported fraud losses were up 70% in 2021 compared to 2020. More than 2.8 million people reported losing $5.8 billion to fraud. Fraud takes a severe financial toll on everybody, especially small businesses. Without the proper fraud prevention strategies, you could easily fall victim to hackers, imposters, and con artists.
Money is tight, given the current high-interest/high-inflation environment. Small businesses can’t risk losing a penny to online scams. Thankfully, we’re accelerating towards more robust digital solutions to help small businesses with fraud prevention. Let’s dive into some common problems business leaders face—and some actionable solutions.
1. DIY Fraud Prevention
Business email compromise (BEC) scams are the most common type of fraud facing small businesses. And while fraud can come in many shapes and sizes, BEC scams are some of the easiest to fall for. You may get an email from what looks like your trusted vendor asking you to reroute payments to a new address or bank account. This is a common scam that business leaders fall prey to daily.
According to the FBI, BEC scams thrive because we lean heavily on email for personal or professional reasons. You might see the following examples pop up in your inbox:
- One of your regular vendors sends an invoice with new payment instructions
- There’s an urgent issue with one of your accounts
These real-life examples cost small businesses thousands—if not millions—each year. In fact, some of the most common attacks Citywide Banks, a division of HTLF Bank has to deal with are check or BEC-related. Citywide Banks, a division of HTLF Bank fraud department is working to defend against these frauds by arming customers with education and additional solutions to help mitigate risk. With some extra diligence, you can take several DIY steps to protect yourself against BEC scams.
When you get a suspicious email, check for the following red flags:
- Grammatical errors
- Payee changes
- Urgency
- Contact information change
- Suspicious documents or links
Double-check the sender's email addresses as well. Scammers often use emails that are almost identical to ones you recognize—for example, Jack.Adams@yourvendor.com (your real vendor) vs. JackAdams@yourvendor.com (the scammer). You can imagine how easy it might be to fall for a scam, especially if you’re quickly checking your email.
To help further protect yourself from being targeted for online scams, scrutinize the personal information you share on social media. Scammers can use alma maters, birthdays, pets’ names, friends lists, and family member names to guess your passwords and security question answers, including what you post and share on other public social media pages. Never click on links from an unsolicited text message or email asking you to change or update personal information.
Never download anything from an email you don’t recognize. Scammers can use malicious software, or malware, to infiltrate your networks and access business-critical information. Malware can also give criminals access to your passwords and financial information without you ever knowing.
One way Citywide Banks, a division of HTLF Bank helps bolster your DIY fraud prevention plan is with Dual Control Online Banking.
Dual Control Online Banking requires two people to authorize and complete transactions and payments, including ACH and wire transfers. The first person—the initiator—makes the request. Then a second person—the approver—examines the request to ensure its legitimacy and approve the transaction.
Dual Control helps reduce fraud risk by involving two people in every transaction. Of course, this still requires those involved to have the proper in-house training to recognize fraud and fraudulent transaction requests.
2. Modernizing Commercial Payments While Increasing Fraud Prevention
Personal information on paper checks can pose a serious risk to you and your customers. Your name, address, account number, and routing number are all readily available. Anybody with basic editing skills can easily duplicate the information and compromise your entire financial life.
Checks also pass between several hands before they’re deposited in the correct account. They might be delivered through the mail, dropped on someone’s desk, or entrusted to an employee. It may sit for a few days before the receiver deposits it—and then you hope they shred it once the money goes through. According to the Association for Financial Professionals, 63% of checks were subject to fraud, in comparison to only 36% of credit card payments.
The risk of check fraud increases with every minute, as anybody coming or going from the office can quickly copy the information. Take it from Frank Abagnale, the master con artist, now working as a Fraud Prevention Agent for the US government. According to Frank, “anyone who sees the front of that check has more than enough information to draft on [that] bank account.” Thus, you’d only want those authorized to have your check, to see the information.
Looking for a way to grow your small business while keeping your working capital at an optimal level and mitigating the risk of fraud? Our small business credit card allows you to take advantage of early payment terms from your vendors without negatively impacting your cash flow while building business credit and safeguarding the funds in your business checking account. Use your card to pay your vendors and extend your accounts payable cycle without incurring interest expenses, as long as you pay your balance in full. This means you can keep your cash flow steady and also have the flexibility to grow your business, all while enjoying the added benefit of fraud mitigation. Try our small business credit card today and see the difference for yourself.
Fraud prevention aside, small businesses and corporate credit cards provide several other advantages in the digital age. A credit line helps you make purchases to improve your business and fulfill orders. It’s often said you have to spend money to make money; without a credit card, you might not have the liquid cash you need.
Business credit cards also help separate operational and personal expenses, making it easier to track your spending. Employees can charge business-related purchases to the credit card instead of using their personal cards and waiting for reimbursement. At the end of the month (or billing cycle), you’ll see a clear picture of how much your employees spend—and you can adjust your limits and privileges as needed.
3. Safeguarding Transactions With Positive Pay
Small business owners know the harm fraudsters can do to their reputations and bottom line. Recognizing the telltale signs of fraud is the crucial first step in helping to prevent it.
Here are a few of the most common scams small business leaders must be aware of, according to the FBI:
- Fake Invoice Scams: Scammers will craft fraudulent invoices for products and services your company regularly uses. They’ll lean on business-critical expenses—like maintaining your website—and hope the person in charge will pay first and ask questions later.
- Tech Support Scams: These scams begin with an alarming pop-up, phone call, or email from what appears to be a well-known tech company. They’ll tell you there’s an issue with your cybersecurity and that they can fix it. In reality, they’re just trying to scam you out of money or gain access to your computer and personal information—usually, it's both.
- Fake Checks Scams: Scammers will overpay with a bad check and then ask you to wire the extra money to a third-party account. When your bank discovers you deposited a bad check, you’ll have already sent the “extra money.” You’re on the hook to pay the bank while the scammer makes off with your cash.
In a world full of financial scams, small business leaders need a safe and reliable way to manage transactions. It’s not a matter of if but when your business is affected in one way or another, exemplifying the need for more streamlined processes.
You can help mitigate risk by leveraging industry-leading fraud tools to help safeguard your business and boost your bottom line. Tools like Positive Pay ht financial fraud by adding an additional layer of protection, especially for companies with small teams.
Positive Pay also combats check fraud and forgery but comparing today’s checks with past checks. This includes watermarks, fonts, printing, and spacing—all slight imperfections a scammer can make when trying to forge checks.
Your trusted banking partner will verify the information, flagging and notifying you of any discrepancies. You’ll then see a spreadsheet of checks to be cleared. From there, you can deny suspicious-looking checks and explain why.
Positive Pay helps stops fraud before it hits your account, potentially reducing the headaches of having your accounts closed or restricted due to fraudulent activity. Check alteration is another common issue that Positive Pay combats through the payee match option.
ACH Positive Pay can be leveraged to control the ACH debits and credits that post to your business account with filters and blocks.
To learn more, talk to your banker about Positive Pay options.
4. Smart Integrated Banking Solutions for Small Businesses
In the post-Covid era, we’re taking massive steps towards digital payments. Even traditional POS transactions rely on digital, touchless payment methods rather than cash. But cybercriminals and scammers aren’t far behind the curve—most are ahead of it. POS fraud is an inevitability in a cashless business world.
According to Forbes, near-field communication (NFC) and radio-frequency identification (RFID)—two technologies often used in POS payments—are vulnerable to data theft. Regarding their cybersecurity, many small business owners focus on their cloud and mobile vulnerabilities. They don’t take POS fraud as seriously as they should, making them prime targets for scammers.
Contactless payment options expose your customers’ credit card information to becoming vulnerable if not properly encrypted. Hackers can directly target firmware within the POS system without you having a clue.
But POS fraud doesn’t need advanced computer hacking skills to cost you and your customers money. Some common POS fraud examples include:
- True Fraud: When someone uses a stolen credit card to purchase items in your physical or online store.
- Chargeback Fraud: When someone makes a legitimate purchase but disputes the charge with their bank. If you, as a business owner, can’t prove the legitimacy of the charge, you might be on the hook for repayment and chargeback fees.
- Card Testing: When criminals make several small purchases to see if their stolen or fake credit card works. This can lead to steep authorization fees and cause you to lose revenue and merchandise when the money doesn’t come through.
Use modern backend operating systems to give yourself the best chance against fraud. Too many small businesses rely on legacy systems like Linux or Windows XP, which is like leaving the door wide open for hackers.
A good way to prevent POS fraud and succeed in the long run is to maintain efficient business operations and provide outstanding customer service. Equip your business with merchant processing solutions so you can remain focused on growing your business.Citywide Banks, a division of HTLF Bank provides cutting-edge POS and payment processing options to help you streamline operations, increase productive, and better protect you and your customers all while giving your customers the payment flexibility they desire.
By combining three powerful technologies, Citywide Banks, a division of HTLF Bank merchant services partner provides your company with the industry’s highest level of security, all backed by a Breach Warranty. PCI compliance also minimizes the risk of credit card fraud, so you and your customers can rest easy.
Other than robust fraud prevention, Citywide Banks, a division of HTLF Bank’s Merchant Services allow you to make better business decisions based on real-time POS data. Fast and contactless payment helps move customers through your store, as they can make payments quickly by simply tapping their phones. Restaurants especially can leverage this technology to turn tables quickly.
Prevent Fraud With Citywide Banks, a division of HTLF Bank
Now more than ever, small businesses are at an increased risk of fraud. Due to Covid-19, inflation, and rising interest rates, some small businesses are forced to work on a skeleton crew, meaning fewer eyes looking for potential scams.
A good way to fight fraud is to partner with a trusted financial institution like Citywide Banks, a division of HTLF Bank. As a leading financial solutions provider for small businesses, Citywide Banks, a division of HTLF Bank offers products and services like positive pay and small business credit cards to help protect your operations while increasing your bottom line.
If you suspect fraud its best to report it to your bank immediately even if no fraudulent transactions have been posted to your account. In the scenario of a malware attack, victims may not see fraudulent transactions, but their account could in fact be compromised.
Get in touch with Citywide Banks, a division of HTLF Bank today to speak with a banker with deep small business insight. Together, you can discuss your liability and the steps you can take toward enhancing your fraud prevention strategy.