Business Fraud

Business fraud consists of dishonest and illegal activities perpetrated by individuals or companies in order to provide an advantageous financial outcome to those persons or establishments. Also known as corporate fraud, these schemes often appear under the guise of legitimate business practices. An array of crimes falls under business fraud, including the following:

1. Charity Fraud

Using deception to get money from individuals believing they are making donations to legitimate charity organizations, especially charities representing victims of natural disasters shortly after the incident occurs.

2. Internet auction fraud

A fraudulent transaction or exchange that occurs in the context of an online auction site is called Internet auction fraud

3. Non-Delivery of Merchandise

Fraud occurring when a payment is sent but the goods and services ordered are never received.

4. Non-payment of Funds

Fraud occurring when goods and services are shipped or rendered but payment for them is never received.

5. Overpayment Scheme

An individual is sent a payment significantly higher than an owed amount and is instructed to deposit the money in their bank account and wire transfer the excess funds back to the bank of the individual or company that sent it. The sender’s bank is usually located overseas.

6. Re-shipping scheme

An individual is recruited to receive merchandise at their place of residence and subsequently repackage the items for shipment, usually abroad. Without the knowledge the merchandise was purchased with fraudulent credit cards, often opened in their name.

Types of Business Fraud

1. Identity Theft

Fraudsters could steal your business’s identity and use it to access your credit. People might get their hands on things like financial statements, bank statements, or your tax identification numbers. It’s also possible to have information taken from your computer.

To prevent identity theft, make sure you keep your statements and sensitive information secure. If you have physical copies, keep them locked in filing cabinets that only you can access. For digital copies, make sure you use difficult usernames and passwords, and avoid falling for phishing scams. Don’t hand your information out to anyone.

2. Payroll Fraud

Payroll schemes are twice as common in small businesses as opposed to large companies. There are a few different ways that payroll fraud can occur at your business.

Employees might ask for pay advances without paying them back. Or, employees might lie about hours worked on their timesheets. Employees could also get co-workers to clock in for them even if they aren’t at work. Do background checks on all employees before hiring. And, you should audit payroll accounts so you can catch fraudulent behavior early on.

3. Money Fraud

Because there’s so much illegal cash circulation you might come across fake bills. Money fraud can happen without you or the customer even noticing. But, counterfeit money is worthless when you go to deposit the cash at the bank.

The most common counterfeit bills are high-valued bills. If you accept counterfeit money, you won’t receive any revenue from the sale. Worse, you could end up giving real currency as change for a fake bill.

4. Return Fraud

The majority of small businesses that sell goods have experienced return fraud in one way or another.

There are different types of return fraud. Some customers might purchase a product, use it, then return it even though nothing is wrong with it. Or, you might have fraudsters who steal products from you and attempt to return them to make a profit. Return fraud can be damaging to your business. You might not be able to wipe out all return fraud, but you can limit it based on your policies.

5. Workers’ Compensation Fraud

Workers’ compensation fraud is another type of small business fraud you could come across if you have employees. There are different ways workers’ compensation fraud can occur, so you need to be vigilant. Employees might get injured outside of work and say they got the injury at your business. Or, employees could make up an illness or injury.

Tips for Avoiding Business Fraud

  1. Purchase merchandise from reputable dealers or establishments.
  2. Obtain a physical address rather than simply a post office box and a telephone number, and call the seller to see if the telephone number is correct and working.
  3. Send an e-mail to the seller to make sure the e-mail address is active, and be wary of those that utilize free e-mail services where a credit card wasn’t required to open the account.
  4. Consider not purchasing from sellers who won’t provide you with this type of information.
  5. Purchase merchandise directly from the individual/company that holds the trademark, copyright, or patent. is an Online Lending Marketplace.



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