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Fraud Screening for Small Businesses: Risks & Resources

Author: Rafael Lourenco / Source:

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Most small business owners don’t expect to become fraud victims and they often don’t know which fraud threats to guard against. But criminals know that small businesses usually make the easiest targets, so every small-business owner should have a clear understanding of the fraud landscape. Here are three major types of fraud and how to protect your business.

Insider fraud risks for small businesses

Insider fraud – – a scheme perpetrated by a company’s employees – is what many business owners are most concerned about. It’s not the most common type of fraud that small online businesses face, but it does happen and can be very expensive.

The median loss for a single case of occupational fraud is $150,000, according to 2016 figures from the Association of Certified Fraud Examiners. That figure is accurate for small businesses as well as enterprises, and in more than 8% of cases, the victim companies were also required to pay a fine for allowing the fraud to go undetected. Those numbers mean SMBs are at disproportionate financial risk from insider fraud like check tampering, payroll falsification, skimming, and simply stealing cash.

Resources to fight insider fraud

  • No matter how few employees your company has, these fraud controls are important:
  • Regular reconciliation of your books and payroll records
  • A way for employees to report suspected fraud
  • Proper employee training
  • Random checks of accounts and payroll records

You may also decide to hire an outside accountant and payroll service rather than letting in-house employees handle those tasks. The Small Business Administration recommends purchasing business fraud insurance to protect you from occupational fraud losses.

Point-of-sale fraud risks for small businesses

Many SMB owners remember the days when a counterfeited mag-stripe credit card or a falsified paper check were big risks for point-of-sale transactions. These days, real-time check verification and the EMV liability shift have made it harder for crooks to use those tools. But EMV card-fraud liability protection only helps your business if your POS terminals are EMV compliant.

More than a year after the changeover in the US, only 38% of stores…

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