Businesses Beware: Small Business Fraud Prevention

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Distressed woman holding credit card and on the phone

There’s a lot to keep track of out there in the business world, especially for small business owners. Not only must they monitor the ins and outs of daily business — including what goes in and out of the company bank account, but now they have to also watch out for fraudulent activity.

Most moderately-sized companies don’t have the resources or the personnel to devote a full-time position to preventing fraud. Most companies are doing what they can, implementing internal controls to detect fraud, monitor the business for red flags, or report suspicious activity (if an employee steals, for example) to management.

With such intense financial pressures — even when business is good — it’s no wonder that companies are falling victim to not just employee fraud but small business fraud that originates outside the company.

In the modern digital world, it’s distressingly easy to commit fraud. That means businesses are more than ever at risk for fraud.

If you own a business, it’s crucial to protect yourself and your customers from small business fraud, credit card fraud, and other types of crimes that are being committed daily by people who want to take advantage of lax security and naivete.

Fraudulent Activity and Small Business Fraud Prevention

It has come to our attention that there are misleading and potentially fraudulent mailings that look to be an official bill related to business registration requirements from the Washington Secretary of State’s office.

Although the Washington secretary of state is working with the attorney general’s office to see what actions need to be taken in order to protect businesses in Washington, we want to help spread the word.

If Horenstein Law Group currently serves as your registered agent, you need not worry about this, since these scam letters will come directly to us.

The mailings being sent request that the business sends $121.86 to an Olympia post office box by a certain date and warns that your annual report will not be filed until the payment is received. The mailing does not mention the “Office of the Secretary of State” or include its logo, which is found on all official correspondence.

A sample of what the mailing looks like is above. The secretary of state’s office suggests that if you receive such a notice, you should contact the attorney general’s Consumer Protection Department or file an online complaint here.

What You Can Do About Small Business Fraud Prevention

Fortunately, there are plenty of resources available to small business owners seeking information on small business fraud prevention. For example, the Association of Certified Fraud Examiners (ACFE) has some good fraud resources.

Inc.com, citing ACFE as its source, reports that small businesses “are the most vulnerable to occupational fraud and abuse. … The smallest organizations, 100 employees or less, suffered higher median losses than did the largest organizations (10,000 employees or more). While the largest companies suffered losses of $97,000 on average, small businesses’ losses averaged $127,500.”

Another good resource for general information on in-house fraud, the California Society of CPAs has a list of eight “Fraud Prevention Steps for Small Businesses.” It includes background checks, surprise audits and (not surprisingly) consulting a certified public accountant. CPAs can help with reviewing accounts, including accounts payable, and heading off fraud loss.

Horenstein Law Group

The attorneys at Horenstein Law Group are providing this information as a general resource on small business fraud. But as we noted above, there are some very specific threats that we are monitoring.

There are many types of fraud and many ways of falling victim to fraud. But it’s not all bad news; prevention and detection of fraud may be difficult,

If you have any questions, don’t hesitate to contact us.

At HLG, we’ve been helping business clients for many years. Our Vancouver, WA business attorney’s specialize in a wide range of law practices, including business transactions, business planning, business finance, as well as commercial real estate, civil collaborative law, and land use and environmental law, among others.