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The Caribbean has seen an uptick in financial crimes in recent years, including fraud schemes. Financial fraud has impacted economic security in the region, making it more important than ever to protect your business.

When it comes to the impact of fraud on businesses, losses can affect a company’s ability to pay its expenses, cover payroll or carry on basic day-to-day operations. Payments fraud — credit card, wire and cheque fraud — is among the most common types of fraud experienced by businesses.

Read further to learn how these three types of fraud can occur and what you and your business can do to help prevent it from happening.

1. Credit card fraud

As many companies make and receive credit card payments, credit card fraud can impact them in a few ways.

For example, when a credit card number is compromised, a fraudster can pose as a legitimate customer and use the card to make purchases at your business online in a “card not present” transaction. Unless these transactions have been authenticated, you will be on the hook to cover these purchases once they’re discovered as fraudulent. The hassle and cost of dealing with such chargebacks can affect your productivity and take you away from running your business.

On the other hand, if your business credit card has been compromised, the financial impacts can be more direct. If a fraudster racks up charges on your account, it may prevent you from covering business-related purchases you may want to make on your credit card. As a result, you may (at least temporarily) need to cover the transactions with cash flow reserved for other purposes.

How credit card fraud can happen

One way is for an employee to receive a text link from what appears to be a shipping company, asking for a customs payment to complete the shipment. The employee clicks on the link and enters the details of their business credit card on the website, including the expiry date and CVV. As it turns out, the email and the website were fake, and now your business’ credit card details are in the hands of a scammer who uses the information to make online purchases.

Most credit card issuers offer cardholders Zero Liability Protection, which protects businesses against unrecognized transactions made on your credit card. This makes a credit card a secure payment method for businesses. Still, the impact on business operations and cash flow can cause headaches and hassles and affect your business’s ability to perform at its best.

How to avoid credit card fraud
  • Regularly review account statements so you can quickly spot unauthorized transactions
  • Avoid sharing credit card details with unreputable sources
  • Limit access to credit cards to only a small number of trusted staff
  • Regularly update passwords on account sites
  • Educate yourself about phishing emails and text messages and put education in place for your employees with proper security awareness and phishing training. Learn more about phishing here.

2. Wire fraud

Wire fraud occurs when criminals trick someone in your business into sending money via a wire transfer. This type of fraud can happen through Business Email Compromise (BEC), Vendor Email Compromise (VEC), phishing, malware, or a combination of these scams that give fraudsters inside information to take advantage of an owner or employee. Learn more here.

The impact on your business can be significant since funds are very difficult to recover — once a wire transfer is sent, the money is gone.

RBC Chief Information Security Officer Adam Evans explains that an organization’s resilience depends on building a cyber security culture. “A culture isn’t just some person in a closet in IT working on the problem, but it starts with a Board and impacts leadership and management, all the way down to the frontline employees who interact with customers and deal with the day-to-day work for the company.”

When security is a top priority for an organization, it becomes embedded into its DNA, and everyone understands the priority cyber security has on delivering business services.

How wire fraud can happen

A fraudster hacks into the email of an owner, CEO or another high-ranking executive. They then send a fake email to an employee, requesting an out-of-the-ordinary deposit or transfer while the executive is travelling for business. They tell the employee that the transaction is highly time sensitive, creating a sense of urgency.

Because the fraudster has been monitoring email activity through the business and has done their research, they know to wait for the executive to go out of town so that the email recipient can’t verify the request face-to-face, and they include reasons for not following standard policy or for keeping a request secret: “I plan to make an announcement in the morning. Until then, please don’t tell anyone.”

The large transfer is made to the fraudster’s account, and the business loses the amount transferred immediately.

Wire fraud largely relies on social engineering tactics more than sophisticated technical applications, so your employees and your internal procedures will be the best defence against such scams.

Ways to protect your business from wire fraud

Educate your employees about phishing and BEC scams. Consider installing a formal ongoing testing program to help staff identify suspicious emails. For example, there are programs that sends fake phishing emails to staff to test awareness and measure vigilance.

Carefully review all account numbers before any money is sent

Adopt a ‘stop and think’ approach to strange behaviour

Implement two-person verification processes — two sets of eyes on a transaction are better than one

Confirm requests through alternative communication methods, such as a phone number you have used before. Don’t use the contact information included in the email

3. Cheque fraud

While electronic and card payments have started to replace cheques across many business transactions, millions in cheque transactions still take place. These high numbers keep the door open for cheque fraud, which continues to be pervasive throughout the Caribbean. . Cheque fraud can happen in a few different ways — through the theft of cheques, the creation of fraudulent cheques or by changing the name or amount of a legitimate cheque.

Remember, doing your due diligence for all the cheques you deposit into your account is crucial. While your bank may give you access to provisional funds in the interim, once you deposit a cheque, the amount will be removed from your account if the cheque is found to be fraudulent when processed. If the processing time is lengthy (i.e., if it’s a foreign currency cheque), you may have long spent the money and have a more challenging time recouping what’s owed to you.

How cheque fraud can happen

A fraudster engages a company and requests a quote for services. Once the quote is sent, the fraudster ‘pays for the service upfront,’ which provides a false sense of comfort to the unsuspecting company.

The cheque the fraudster sends is intentionally made out for more than the invoice amount. The cheque is sent directly to the company via courier or to the bank to be credited to the company’s account. Subsequently, the person who wrote the cheque advises the company of the overpayment and requests that the excess funds be returned.

The cheques used in overpayment scams are fraudulent or counterfeit; the victims return the overpayment amount before the cheque clears. When the company is alerted that the cheque is fraudulent, they’ve already lost their funds.

Here are ways to protect your business from cheque fraud:
  • Businesses accepting payments via cheques should question cheques arriving at your business earlier than expected or for a larger amount than expected.
  • Keep your cheques in a secure location
  • Review your accounts regularly so it’s easy to spot unauthorized transactions and avoid issuing cheque payments for potentially fraudulent transactions
  • Shred unused cheques from closed accounts
  • Switch to electronic payments whenever possible and convenient

While payment scams have become more prevalent over the years, the solutions to mitigate risk and loss have evolved. Keeping your prevention tactics top of mind — and adopting systems that can help you stay informed about unusual activity — can help protect your business from fraud and allow you and your team to stay focused on your business priorities.