Scams Targeting Small Businesses

Contributors: Kevin Frisch, Associate and Brad Deutsch, Principal, Foster Garvey PC

News outlets regularly discuss the impact of scams and fraud on individuals and high-dollar schemes that target large and established companies make headlines. However, less attention is paid to lower dollar frauds and scams targeting small businesses. Small business personnel may be more likely to make key mistakes in interactions with scammers, as they may jump at opportunities to save money on business essentials, and they shoulder significant workloads without the infrastructure or security tools available at larger businesses to protect themselves from scammers.

Radio might not seem like a natural focus for the criminal element, but a post by Carl Goldman of KHTS on in July of this year highlighted a relatively sophisticated scam operation specifically designed to target radio businesses.

Q: We all hear about phishing a lot, but what other types of scams should radio stations and other small businesses be on the lookout for?

A few relatively common schemes are outlined briefly below.

Overpayment Scams

In the KHTS situation, the approach was a variant on an over-payment scam. People often encounter this type of fraud in connection when making sales on person-to-person sales platforms, apps and websites. The prospective buyer offers to make a purchase, sends more money than required and asks the seller to reimburse the difference. Payment on the original wire transfer or check is then stopped, the seller is unable to recover the “refund” sent out to the alleged buyer and the seller is often left with less money in their account than they started with.

With KHTS, the scammer approached with a plausible back story, posing as a marketing agency with an apparently legitimate website and submitted a professionally recorded radio commercial for consideration. The scammer reportedly offered to pay in advance, “inadvertently” overpaid and requested that the station return the excess. Fortunately, the station identified the questionable situation, contacted their bank and didn’t lose any money.

Fake Invoices

A disconnect between business operations teams and bookkeeping personnel can create a risk that fake invoices get paid without anyone in your business being the wiser. These invoices are often for relatively small amounts, to reduce the likelihood that they will trigger additional review or require sign-off from members of the business team. If payment on a fraudulent invoice is sent out, the scammer may then repeat the process over and over again.

Scammers submit what appear to be legitimate invoices for goods or services, often directly to an appropriate e-mail address within your organization, whether it is an “accounting@” email address or the business email of a person listed on your organization’s website as your bookkeeper or serving in a related role. The invoices may be near-exact reproductions of invoices from real vendors that service your organization, with key details changed to ensure that payments wind up in the hands of the scammers, or they may be from nonexistent companies or organizations like the marketing agency that approached KHTS, with plausible-sounding names and professional-looking websites.

Discount Offers

Scammers may also approach your business with offers of steep discounts on goods, with the deals available only for a limited time. These offers generally come from parties holding themselves out as representatives of industry-appropriate vendors of office supplies or similar things. Diligent scammers may even call in advance or visit your location to identify companies that you regularly make purchases from.

The party reaching out with the offer will have a plausible explanation for the discount, which may include something like a sales competition, a last-minute cancellation by another customer or an effort to get rid of inventory before the end of the fiscal year. These extraordinary circumstances will also be used to explain why the person getting in touch is different from your regular sales representative, why payment processing will be handled differently from your normal orders, why payment must be made immediately, etc. The deals may be tempting, especially for cash-strapped operations or for employees with bonus calculations based on how far their department comes in under budget at the end of the year, but the best case scenario is generally that the goods are counterfeit or of a lower quality than you are led to expect. More often, they simply do not exist.

Q: What are the best ways to avoid falling victim to these types of scams?

  • Limit the ability to transfer funds. While it’s likely essential to your business for some personnel to have company credit cards, keeping that number as low as you reasonably can, establishing spending limits and multi-party approvals for expenditures above set limits and ensuring that as few people as possible have access your business’ bank accounts can help limit the ways a scammer can take money out of your business.
  • Keep a close eye on your books. It may seem like a waste of time, particularly in a leanly staffed small business, for one or more executives or members of the operations team to sit down with a bookkeeper on a regular basis to review and approve payment on invoices, but a regular and relatively frequent joint review will give your bookkeeper a better idea of what normal business expenditures look like and help identify inappropriate or fraudulent invoices or charges before payment goes out (or identify problems fast enough to get a bank involved to try to unwind an error).
  • Stick to your standards. An appointment on the books for a sit-down with your bookkeeper does not help to protect your business if you cancel it, and spending limits and credit card usage policies aren’t worth the paper they are written on if they are regularly disregarded by your team. When you establish standards and business practices, it is important to be sure first that your team is able to adhere to them and then that they actually do so.

Note from RAB: While Radio Matters blogs typically cover consumer insights about radio, this contributed blog is important for all businesses, whether they are large or small, in retail, broadcast or any other category and should be shared as you would any other blog.


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