You know how important it is to protect your personal identity. You safeguard your Social Security number, shred sensitive documents, and regularly check your credit report to avoid becoming a victim. But are you taking similar precautions with your business’s identity? You should be.
According to the National Cybersecurity Society’s 2018 report, Business Identity Theft in the U.S., business identity theft is a growing problem. The report cited several examples of the issue, including:
- The fraud department at a large U.S. financial institution indicated they’d seen a 200% increase in fraudulent wire transfers due to compromised business emails.
- In 2015, the Treasury Inspector General for Tax Administration reported that the United States had identified 233 business tax returns filed using suspicious federal employer identification numbers (EINs), claiming $2.5 million in fraudulent refunds.
- In 2018, Dun & Bradstreet reported a significant increase in business identity theft in 2017 — up 46% year over year, the most substantial increase in any year since tracking began in 2005.
Despite these sobering statistics, many small-business owners are unaware of the magnitude of the threat or aren’t sure what to do about it.
What Information Are Business Identity Thieves After?
Business identity theft comes in many forms, so the types of information thieves are after vary. The National Cybersecurity Society report identified five main types of business identity theft:
- Financial Fraud. A thief obtains a new line of credit, loan, or credit card using a stolen EIN. They may also file fraudulent property liens claiming the business owes huge sums of money.
- Tax Fraud. A thief files a fraudulent tax return using a stolen EIN to obtain a tax refund from federal or state governments.
- Website Defacement. A thief manipulates a business’s identity on the Internet to redirect traffic to another website and steal customer data. The hacker may demand a ransom before the company regains control of its website.
- Trademark Ransom. A thief registers a business name as an official trademark and demands a ransom to release the trademarked business name.
- Business Email Compromise. This scheme targets businesses that regularly perform wire transfers. A thief hacks into a business owner or executive’s email and sends an email to the finance team asking for a last-minute wire transfer to a bank account controlled by the fraudster.
A business’s EIN is one way identity thieves can defraud a company or the government, but it’s far from the only piece of information thieves use to perpetrate business identity theft. Much of the data used by thieves is readily available via a business’s website, social media accounts, or in public records. That makes it all the more important for companies to recognize the risks posed by business identity theft and take the necessary precautions to prevent financial loss and other damages.
Why Businesses Are Prime Targets for Identity Theft
Criminals commit business identity theft for the same reason they commit consumer identity fraud: financial gain. But even small businesses typically operate on a larger scale than individual consumers do, making companies a bigger target. Consider the potential benefits from a criminal’s perspective:
- They Have Potentially More Money. Businesses maintain larger bank account balances and may have higher credit limits than individual consumers.
- It’s Easier to Avoid Detection. Businesses enjoy flexible payment terms that allow them to receive the goods or services they order and pay for them within 10 to 30 days after receipt of the invoice. This gives thieves a larger window of opportunity to avoid detection.
- There’s Less of a Red Flag. Businesses tend to place large orders. If you tried to buy 10 laptops with a personal credit card, the credit card issuer might flag the transaction as suspicious. However, it’s not unusual for an established business to place large equipment orders, so the same transaction might go unnoticed.
- There’s Less Security. Small businesses don’t have the sophisticated security and oversight procedures that a large corporation has.
How to Prevent Business Identity Theft
The good news is that businesses can reduce the threat of business identity theft and minimize their losses by following these simple and practical steps.
1. Protect Your EIN as You Would Your SSN
There are many circumstances in which you must give out your business EIN, such as to open a bank account, for tax and wage reporting, and to complete W-9 forms. However, keep in mind that thieves can use this number to commit several business identity theft schemes. Try to limit disclosing your EIN unless it’s absolutely required, just as you would protect your Social Security number.
2. Secure Business Records and Documents
Although many identity thieves work online, identity theft also occurs offline. Maintain only the records necessary to operate your business and shred any physical document that’s no longer necessary. Try to limit the amount of mail and paper with financial information printed on it, since intercepting mail or rummaging through garbage is a common tactic of thieves looking to steal sensitive information. Sign up for electronic bank and credit card statements whenever possible.
Keep all business records in a secure location, preferably stored digitally on the cloud rather than on a physical computer, external hard drive, or easy-to-steal flash drive. If you maintain paper records, secure them in a locked fire-resistant cabinet and limit the number of people with access to them.
3. Regularly Check Your Company’s Credit Report
Did you know your business may have a business credit report and credit score, even if you’ve never applied for a business loan? The three major business credit bureaus — Dun & Bradstreet, Equifax, and Experian — each have their own business credit scoring models. And unlike individual credit, anyone can view your business credit report without your permission or knowledge.
Regularly check your business credit report. If you find an error or any fraudulent accounts, contact the credit agency that generated the score and dispute it.
4. Consider Enrolling in a Credit Monitoring Service
If you’re worried that your business credit has been compromised, consider enrolling in a credit monitoring service so you’ll be alerted when your business credit report or credit score changes. Dun & Bradstreet offers CreditMonitor™, Experian offers a business identity p
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