How do you prevent frauds in business? With the rising cases of fraud, theft, and embezzlement, it becomes essential that businesses understand procedures to shield themselves from fraud.
Fraud cases in the middle east rose to an average of 48% in 2021. From credit card frauds to email frauds, a lot of individuals have fallen victims to fraud. Frauds increased after the Covid-19 pandemic as people had to do anything to survive. The desperation and need created for criminals to penetrate the personal and financial data of their victims, and manipulate the records to their favor.
In all these, it is painful to realize that a lot of small-scale and large-scale businesses don’t have a fraud risk management framework or an investigation team. The absence of a secured anti-fraud system makes your business an easy target.
A lot of times, frauds on businesses are not usually the fault of the business owner. Uninformed and ignorant staff, mismanagement of funds by the workers or board, suppliers frauds, customers, or third party fraud schemes opens a pathway to alter the cash flow of the business.
You must learn how to prevent frauds in business and equip your business with innovative strategies to prevent business frauds. Let us guide you with notable insights on how to prevent frauds in business.
What are the different types of frauds in business?
The first way to prevent frauds in business is knowing how to identify one. Here are seven of the most common types of frauds in business.
1. Email Fraud
Email fraud is a type of fraud where you receive a mail with a promising offer that exposes you to a long chain of cyberattacks. The fraud mechanism could include a phishing link, a fake investment scheme, or a plea to support a fake humanitarian scheme. It might become too late for you to realize that you have been defrauded.
2. Credit Card and Debit card fraud
All that a thief needs to carry out a credit card or debit card fraud is to lay hands on your cards. Sometimes, they don’t need to physically possess your credit card, you might ignorantly supply them with your card details; CVC/CVV, card expiration date, and your card number.
3. Embezzlement
Embezzlement is one of the popular business fraud cases that has remained over the years. A staff or a member of your management team might decide to pad up some details and siphon funds without your notice.
This might go on for years before you will find out that your financial records were adjusted to foot their personal bills. They might go as far as plunging your business into bankruptcy.
4. Falsifying Documents
It’s not that difficult to get a business person to buy fake property. You probably need some extensions, a new branch, or expand the business to a new territory only to fall into the hands of a fraudster. He sells you imaginary properties with fake documents, walking away with your cash.
5. Employee fraud
Some employees are conmen. They can go as far as falsifying payment records to inflate the paychecks to their advantage, without your notice.
6. Account Takeover fraud
One of the deadliest frauds that businesses face today is account takeover fraud. This begins with the fraudulent control of your social media account down to your bank accounts.
7. Internet Fraud
Frauds happen on the internet. The internet is the easiest place to get defrauded. Your business might be existing on the web and all a fraudster needs to do is to launch a fraud scheme that compromises your personal data, takes control of your accounts, or steals millions of dollars from you. The process can include wire fraud, or theft of the company’s supplies, assets, and products.
How to prevent frauds in business
Let’s get back to the main issue; How do you prevent frauds in business, especially for future businesses in the Middle east? Here are five ways to prevent frauds in business.
1. Be thorough
A lot of business owners do not realize the benefits of being thorough in their business deals. Most successful fraud attempts are carried out because the employer couldn’t see beyond the sugar-coated offers.
Cultivate the attitude of looking into every detail. The accounting books, proposals, emails, ensure that you do not approve anything that you do not understand.
2. Decentralized managerial and accounting duties
One of the mistakes that most business owners make is having one person control the documentation process of the inflow and outflow of funds. If there is one person at the helm of affairs, they can work with the suppliers to deflate input and inflate output.
If they can successfully decrease the input of materials and tally the decrease to sales, the unaccountable gains become their personal interest. You can have a different staff handling the sales invoice, another one managing the receipts, another staff handling the processing of client requests, and the last person in charge of payments and remission of funds. These individuals should work as separate entities.
3. Employee Training and sensitization
Most of the business frauds we have noticed are because of the negligence of the employee. Without proper training on fraud control, your employees will keep falling prey to fake transactions and falsified documents. It is essential to teach them how to spot and report fraudulent activities.
4. Run background checks before hiring anyone
Knowing your employees might sound like an extremely difficult task. But, you mustn’t hire a criminal dressed in a neat suit and a nice tie.
You can go as far as contacting their past employers to understand their records. You shouldn’t rule out the fact that your employees will defraud you.
5. Implement Anti-fraud techniques
You cannot be too careful enough, but you can prevent frauds from happening. You can start with guiding your credit card details, maintaining a consistent and strict account audit, and scrutinizing your bank accounts. Do not attend to strange emails with ridiculous offers nor should you click unfamiliar links.
