Behind the Curtain: The Surprising Faces of Small Business Fraud

Fraud Awareness Month: Small Business Fraud

Fraud can strike when you least expect it. Here's our story...

This is the true story of one of WhistleBlower Security's previous sister companies. When I started WhistleBlower Security so many years ago, little did I realize that I was about to discover that I had been working for a business that was in the process of being scammed. The irony of this still sits with me to this day and I think drives some of my passion and commitment to ensuring employees have options to speak up.

The first scam involved a sales rep whose wife was a business manager of one of our clients. Our sales rep would deliver products to a particular retailer and we were perplexed at the lack of sales flow through this specific dealer of these products. One random day a consumer called our head office looking for assistance with a claim related to our product that was supposed to be sold. This is when we discovered this particular retailer, or at least the business manager (the wife) never sold them our product.

They illegally sold the product, deposited the cheque in an account set up with a similar corporate name and had been doing this for over a year. It was a particularly brazen and somewhat sophisticated scheme that involved parties from both businesses engaged in both defrauding our organization and our reseller partner.

The discovery led to some stealth investigation on our part, a sting, a car chase and ultimately, we recovered approximately $3000 – nowhere near the amount of funds stolen. The sales rep cried and begged forgiveness. Both he and his wife were fired. The parties were never charged.

The results of this discovery led to new internal controls both at our organization and new processes for our reselling partners. But again, without the random phone call from the end consumer we would never know.

The lessons learned from this unfortunate journey into the world of small business fraud are many. Most importantly, all team members need to be aware of red flags amongst their colleagues. Sudden possession of new boats, cars, or fancy trips can all be signs of potential fraud. Ensuring there are balances and checks along the way during every transaction and payment are also essential to securing the processes of managing your business.

Don't let your small business fall victim to fraud:

  • Be skeptical of urgent requests.
  • Verify the legitimacy of a request by contacting suppliers, agencies, or executives directly.
  • Be wary of phone calls, mail, emails, or texts from persons posing as government officials requesting bank account information or other information in order to issue you cheques.
  • Don’t open, or reply to, any suspicious emails and don’t click on any links or attachments within them.
  • Use contact information you have in your contacts list, or go to the website of the legitimate business for the correct contact information.
  • Check all invoices. Make sure all items on the invoice were ordered and delivered.
  • Ensure your computer systems are secure and that your anti-spam, antivirus and anti-spyware software are up to date, whether working from home or at the office.
  • Encourage employees to use strong passwords to protect their email accounts from hackers.
  • Educate your employees about scams targeting businesses.
  • Stay vigilant!

The statistics show that corporations lose up to 5% of their revenues to fraud and that is based on the number reported. It is likely far higher than that due to instances not reported. Now more than ever, with more digital attacks happening, we need to incorporate tools to protect and empower our team. Confidential hotlines are just one way to ensure your team has access to you and can report when they feel something is amiss. Educate, train, and empower your team to protect the future of your business. Don't fall victim to fraud!


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