Small businesses feel the most pain from fraudsters' tricks: Internet Scambusters #1,109
Small businesses and gig workers suffer proportionately more than big firms from scams because they may not have the resources to properly protect themselves.
Plus, they often don't have the time or money to put things right after they get hit by the fraudsters.
In this week's issue, we identify some of the most common scams they face and the steps that can help protect them.
Let's get started…
Save Yourself From These 20 Small Business and Freelancer Scams
Small businesses and self-employed people are under siege from scammers. They lose more per fraud on average than big firms, and they're less able to recover from the losses they suffer. More than half of them never get any of their money back.
This is fraud on a huge scale. There are more than 31 million small firms, employing less than 100 people, in the US. In fact, most of them are one-person companies. Add in another 5 million freelancers and gig workers and it's easy to see why they're a top scam target in the commercial world.
Many of the con tricks have been around for years but, as we so often report, technology, notably hacking and the use of ransomware, are among the main drivers of newer small business scams.
If you're one of these hard-working people, or know someone who is, here are the most common frauds to be on the lookout for:
- Business Email Compromise: Starting from a successful phishing attack - by phone or email - hackers pose as a senior executive in the business instructing an employee to send money via wire transfers or a changed bank account number. Increasingly, scammers are using AI to fake executives' voices and even video images.
- Social Engineering: As above but this time the crooks pose as clients, government departments, or fake employees seeking redirection of payments.
- Ransomware: If your poor security allows a fraudster to hack your network, they'll freeze your system, encrypt your data, and demand a large sum to "unfreeze it," which they may never do, even if you pay up.
- Phishing: Probably the number one source of scams are emails pretending to be from someone you know, often linking to phony replica websites that steal your sign-on information.
- Fake Invoices: Bills for products you never bought or ordered. Crooks often use threats of legal action or scare tactics like stamping "Overdue" on their invoices. In other cases, scammers gain access to a victim's account on freelancer sites and send invoices to their clients.
- Tech Support: Initially targeting consumers, these tricks involve not only claiming your systems are virus-infected but also using high-pressure sales tactics to get you to sign up for some sort of security program.
- Supply Chain Attacks: A form of social engineering in which fraudsters pretend to be one of your suppliers to steal customer data or confidential commercial information.
- Overpayment: This longstanding scam involves sending a check (which later turns out to be fake) and asking you to forward part of the sum to a third party (the scammer).
- Fake Job Opportunities: Ads are used to trick people into applying for work as a cover for stealing identity information or getting victims to pay for supplies, security checks, or training.
- Directory Listings: From having your name or company in a non-existent business or community directory, to advertising on calendars or even restaurant menus and placemats, which never see the light of day.
- Phony Award Schemes: Usually in the form of costly certificates and trophies for made-up awards that you can display in your office or advertisements. They can land you in trouble if they're identified as dishonest.
- Tax Fraud: Scammers exploit the complexity of small business or self-employed tax returns by impersonating IRS officials claiming errors or non-payment of back taxes. And because time-squeezed small firms and freelancers may file their taxes at the last minute, the crooks get in ahead of them and steal refunds using stolen personal information.
- Business Coaching: Freelancers, would-be entrepreneurs, and business start-ups often try to up their game by signing up for coaching services that invent all sorts of hollow promises. Many coaching programs are, of course, genuine. But make sure to check their reputations and reviews.
- Non-Payment: One of the easiest scams to pull off. Crooks order products, services, and, in the case of freelancers, assignments. Then they simply don't pay and disappear with the proceeds of the scam.
- Business Loans: Many small firms encounter cashflow problems. Those who need to bridge this with a loan and are perhaps reluctant to use their bank are lured into paying upfront fees, often with low-interest incentives, but the loan never materializes or has conditions that make it way more expensive.
- Business Opportunities: These generally encompass a whole range of work-from-home scams, from "secret shoppers" to pyramid schemes and dubious franchise programs. They usually involve upfront payments or use overpayment tricks.
- Fake Reviews: Fraudsters claim they can change negative online reviews or post positive ones for you. Some may be able to do that but it's illegal. Same goes for fraudster claims that they can improve your credit score.
- Paying For Freebies: Scammers offer to sell you posters and other documentation that may or may not be required by law. But often these are available free of charge from relevant government departments.
- Cheap Card Processing: Ads and high-pressure sales calls are used to trick victims into believing they can lower the charges for card payment processing. Usually they can't, and you could end up in legal trouble.
- Recovery Programs: After a natural disaster or a ransomware attack, fraudsters claim they can get you back up and running in return for a hefty fee. The only running is the footsteps of the scammers as they make off with your money.
Safeguard Your Small Business from Scams
One of the main reasons small firms and freelancers get caught out by scammers is that they don't have enough security checks in place. Get this right and you'll significantly cut the risk of falling victim to fraudsters.
Here are some of the important measures you need to take to stay safe:
- Secure processes. At its most basic, this means having strong security software, strong and unique passwords, and using multi-factor authentication (MFA - see How to Easily Enhance Your Password Security). Also, limit who has access to your network and thoroughly check out job applicants.
- Secure payment processes. Don't pay by untraceable methods, and have two people review all payments above a certain amount.
- Education - both for yourself and, if you have any, your employees. That means being scam-aware and providing clear, regularly reviewed and tested employee instructions.
- Take time. The smaller your business, the more likely you are to feel under pressure to get through your to-do list. When that happens, you could overlook important safety checks or yield to threats. Slow down.
- Know who you're dealing with. Research your clients, suppliers, and employees. Never assume someone is who they say they are or who, these days, sound like or appear to be them.
- Back up. Every day! Keep offsite copies of your systems and data that can be reinstated after a ransomware attack or a hacking incident.
- Double-check everything that involves payment - into or out of your business. Schedule part of your working week for a financial review.
- Monitor your personal and business banks and card accounts regularly.
- If you need money, talk to your bank or a reputable business advisory service. If you're told you're entitled to a grant, check it out thoroughly. There are a lot of phony schemes out there.
- Don't yield to threats. Most legitimate businesses and all government departments don't use threats to rush you into action.
Two government services are especially helpful in safely managing your small business or freelance work - the US Small Business Administration and the Federal Trade Commission.
That's all for today - we'll see you next week.