Scams are a significant and growing problem for small businesses. One of the best ways that small businesses can protect themselves from scams is to stay informed about the common scams circulating and the different techniques used by scammers, and to report them.
One of the most common scams targeting businesses currently that BBB Serving Wisconsin has seen an increase of, is the business email compromise (“BEC”). Also referred to as the payment redirection scam, these are financial scams using the guise of authority to steal money.
Most recently, the BBB has seen this with the utility scam (callers posing as a local utility company that threaten to turn off power and demand payment) and parish churches (imposters pose as vendors convince a work executive in the finance or accounting department via email to wire transfer money).
“These scams are horrific and can devastate any business,” said Jim Temmer, BBB Serving Wisconsin CEO/president. “What we’ve been seeing is that companies of all sizes are targets, along with increasingly more victims and very large money losses. We all need to help spread the word to business owners and management teams to lessen the chance of more victims falling for these.”
Some common small business scams include:
• Business Email Compromise (“BEC”). Company personnel with payment authority receive an email that impersonates the CEO or an outside business, asking for payment or noting the necessity to transfer money. Scammers trick the unsuspecting employees and executives and persuade them to wire large amounts of money.
• Phony invoices. Businesses receive fake invoices demanding payment for products or services never ordered or received. Sometimes, solicitations are disguised as invoices. Often, if you look closely, you’ll see fine print that identifies the bill as an actual solicitation for business. Generally, the amount starts out small enough to not initially raise a red flag.
• Directory scams. A problem that has plagued businesses for decades involves deceptive sales for directories. Commonly, the scammer will call the business claiming they want to update the company’s information for an online directory or the scammer might erroneously state he is with the Yellow Pages. The business is later billed hundreds of dollars for listing services they didn’t agree to or for ads they thought would be displayed in the Yellow Pages telephone book.
• Stolen identity. Scammers pretend to be a legitimate company for the purpose of ripping off consumers. When it comes to stolen identity, the company doesn’t necessarily lose money, but their reputation is potentially tarnished as angry customers who were ripped off by the scammers think the real company is responsible.
They may set up a fake website and “hijack” your company name and address. They may also use brand hijacking - the blatant copying and misuse of company logos and website content - to impersonate a business and deceive unsuspecting visitors who believe they are visiting the real organization's website.
• Charity pitches. Most businesses are regularly asked to donate funds to needy causes, from requests to support the neighborhood’s latest fundraising project to appeals for sizeable charitable contributions. While many requests are legitimate, every year small businesses become victims of fraudulent or deceptive charitable solicitation schemes. Make sure to get a donation letter and check out the charity at give.org.
• Phishing scams. Phishing scams appear to be legitimate emails but are really fraudulent messages that include links. When you click on the link you download a virus that captures personal information. Be leery of unsolicited emails and don’t click on links within them. Instead, hover over the link with your cursor to see the real address. Be sure your computer has the proper firewall and computer protection software.
• Office supply scams. Businesses may receive an unexpected telephone call first. Sometimes an advance call is made to find out what brand of supplies or equipment the business uses.
On the return call, the caller claims to represent a reputable company with which the firm often does business. The caller may state that surplus merchandise is available at a reduced price due to a cancellation or over-order by another purchaser. Don’t be fooled.
• Coupon books. Small business operators are often approached to participate in coupon book promotions. The business offers discounts or extras in the coupon books that are sold by promoters to consumers.
Problems occur if the promoters change the terms of the coupons to make them more attractive to buyers, when the books are oversold or when books are primarily distributed outside the firm’s normal business area. Make sure the coupon book is being promoted by someone you trust, and that the terms and conditions are clearly spelled out.
• Fax back scams. Businesses will receive an unsolicited fax, usually offering a great deal on a product or a trip. They often require that you send a fax back or call a toll-free number. Be careful. The high costs when you reply are often not disclosed, and you can be charged several dollars if you fax back.
• The vanity scam. In a vanity scam, a business is contacted about winning an award and asked to pay the partial or full amount of the cost of receiving the award. However, these are bogus organizations that often continue to charge the cardholder yearly "membership fees." Always research the organization offering the “award.”
• Business opportunities. Many small business owners are approached to invest in other business opportunities. Promoters may even claim that the venture will increase customer traffic flow into the current business or that little effort is required to collect high profits. Before jumping into business collaboration, make sure you know the value of the product and its true costs. Remember to check out the business at bbb.org.
• The overpayment scam. In overpayment scams, the scammer expresses interest in goods that a business is selling, then proceeds to send a check that exceeds the cost of the item and requests that the victim wire the difference after the check has been deposited into an account. Eventually, the realistic-appearing check will bounce, leaving the victim to pay the entire amount.
The BBB offers these tips to help small businesses protect themselves:
• Keep good records. Keep documentation of all orders and purchases. This will help you to detect bogus accounts and invoices.
• Establish a multi-person approval process for transactions above a certain dollar threshold.
• Never provide personal information or financial details to anyone over the phone that you don’t know.
• Spread the word. If your employees know about the scam, they’ll be more likely to spot it. Tell your colleagues, too.
• Be extra careful with payment procedures. Create rigid payment authorization procedures. Wire transfers, pre-paid debit cards and gift cards are scammers’ preferred methods of payment. Always confirm that any request for payment with untraceable methods such as these – are verified by an authorized source. Also, BBB recommends paying by a written, company check. That way, a paper trail has been created.
• Make sure that the business billing you is a business you’re familiar with and normally do business with. If not, question it. Get the name of the person you speak with, the company name, address, phone and website.
• Do not give out information about your business to anyone, unless you know what the information will be used for.
• If solicited for a product, service or donation, always ask for further information in writing. Also, ask for references, so you may verify with other businesses what their experience is and how long they’ve been doing business with the soliciting company.
• Set clear procedures for the verification, payment and management of all accounts and invoices. Limit the number of employees that are authorized to place orders or pay invoices. Establish a multi-person approval process.
• Make sure you have proper computer protection software and a firewall.
• Don’t click on links inside unsolicited e-mails. They could spread malicious software or viruses.
• Check a company on bbb.org. If you feel you have been scammed, file a complaint and report the scam to BBB’s Scam Tracker. Let others in your industry know of the scheme you’ve come across.
For more than 100 years, the Better Business Bureau has been helping people find businesses, brands and charities they can trust. In 2018, people turned to BBB more than 173 million times for BBB Business Profiles on more than 5.4 million businesses and Charity Reports on 11,000 charities, all available for free at bbb.org. There are local, independent BBBs across the United States, Canada and Mexico, including BBB Serving Wisconsin which was founded in 1939 and serves the state of Wisconsin.
For more information or further inquiries, contact the Wisconsin BBB at www.bbb.org/wisconsin, 414-847-6000 or 1-800-273-1002. Consumers also can find more information about how to protect themselves from scams by following the Wisconsin BBB on Twitter, Facebook and YouTube.