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Corporate fraud: A growing issue

Reading Time 7 minutes | Written by Henrica Westhoeve | October 10, 2022

B2B-fraude is drastisch toegenomen, waarbij fraudeurs slim gebruik maken van verschillende omstandigheden die zijn ontstaan door de pandemie. B2B-fraude heeft het potentieel om bedrijven lam te leggen met als gevolg verliezen die in de miljoenen kunnen lopen. Maar kennis is macht; in dit artikel bespreken we de verschillende manieren van fraude. In een tweede artikel lichten we de nieuwste ontwikkelingen uit, en laten we zien hoe je als organisatie goed beschermd blijft tegen de meest voorkomende manier van fraude.

Verschillende soorten eurobiljetten en euromunten opgestapeld

In de nasleep van COVID-19 werd de kans op commerciële fraude veel groter omdat bedrijven, financiële systemen en dienstverleners van alle soorten onder extreme druk kwamen te staan om op de crisis te reageren en zich aan te passen. Uit een recent rapport van de Association of Certified Fraud Examiners blijkt dat 51% van de organisaties die aan het onderzoek hebben deelgenomen, meer fraude hebben ontdekt sinds het begin van de pandemie. 71% van de respondenten verwacht dat de omvang van de fraude die hun organisaties treft het komende jaar zal toenemen.

Increasing reports of fraud

What explains businesses' increased vulnerability to fraud? One key factor: during the pandemic, many businesses had to continue their operations digitally rather than physically. They had to, because of the dramatic change in customer buying behavior, with transactions taking place largely online. The other major factor was the shift to remote work. This revealed new risks: data vulnerability, device security and file confidentiality. Many employees worked on unsecured networks and personal computers that could be more easily hacked by fraudsters. Less oversight and decentralization of tasks - such as generating payments - also made it more difficult to detect cases of fraud.

Fraud is expected to continue to increase, which is why there is a need for all businesses and capital providers to have a plan to continually combat online fraud. But before you can create a plan to combat anything, you want to be sure you have a complete picture of the potential threats. What types of fraud pose a threat to businesses? And what are the red flags that organizations need to learn to recognize?

Types of business digital fraud

The list of types of fraud is endless. Here is a selection of the most common and important types of fraud.

Ghost companies

One of the most common types of fraud is the creation of companies for the sole purpose of committing fraud. These companies are a kind of hiding place for criminals to be able to hide their own identities and motives. Often money laundering plays a role here, or the business is used to be able to hide criminal types of cash flow.

Misrepresentation

Another emerging form of fraud is business misrepresentation - defined as material misconduct and deception by fabricating, exaggerating or omitting business details. This form of fraud includes of both first-party and third-party fraud in the marketplace. Examples include exaggerating the number of employees or annual sales or fabricating or altering them.

Never planning to pay

With many online payments, a fraudster may decide to open a new business account to order goods or services, without then paying. Sometimes these fraudsters are spotted in time, such as during the verification process or when there is a problem with a first (to) payment.

Bust-out fraude

Bij de “Commercial Bust-Out” opent een fraudeur opzettelijk veel kredietlimieten en overschrijdt en gebruikt meteen alle kredieten volledig, om vervolgens van de radar te verdwijnen. Met behulp van beschikbare bedrijfsinformatie, digitale identiteits- en eerdere fraude-incidenten en analytische indicatoren kan een fraudeur worden opgespoord, of kan een bust-out voorkomen worden. Sommige frauduleuze bedrijven betalen maanden, soms zelfs jaren, rekeningen op tijd voordat ze beginnen met een bust-out fraude.

Falsification of identity

We are familiar with identity fraud when it comes to individuals. A similar approach is used by fraudsters when it comes to business identity theft. This is where the perpetrator poses as the business owner or representative of a legitimate company. Using the "borrowed" credentials of a legitimate company, a can engage a fraudster in another company in ways that ultimately reduce cash flow, cause problems with creditors and suppliers, and even tarnish the company's reputation. To accomplish this, fraudsters may try to open trading accounts in an existing company's name. They may also use fake documents in the name of a legitimate company or use names of board members. Business e-mail domains similar to those of a legitimate company are also frequently used in this type of fraud to conduct transactions.

Take over

Fraudsters can get to accounts of companies through malware, phishing or data breaches. This allows them to adjust settings and rearrange cash flows to route to other accounts without being immediately detected.

As can be read, there are many ways how shady companies can take money and data from legitimate businesses. How do you weaponize the organization against this? What are questions to ask before doing business with a company? Read all about that in our next blog.

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Henrica Westhoeve

Marketing Content Officer

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