Scamming and fraud has evolved into a seemingly legitimate business model. The consistent acceleration of technology has also fueled this evil albeit lucrative industry. In this Macropay Scam Alert, we look closely at the direct and tangible impact of scams to small to medium-sized enterprises.
The unfair reality is that illegal activities are incredibly lucrative. The fraud industry is a testament to this twisted fact. The timeline of generating six-digit “income” is lighting speed, compared to honest businesses. In fact, the 2021 Cybercrime Report by Cybersecurity Ventures states that the cost of global cybercrime is expected to reach $10.5 Trillion annually by 2025, which is up from $3 Trillion in 2015. In just 10 years, this “industry” has more than tripled.
What is a scam and how do SMEs become victims of scams
At its core, a scam is all about dishonesty and using that to secure finances or information that can later be used to secure property and finances. There are so many types of scams that proliferate nowadays; from small time scams to multi-million dollar scams. Some of these do not just target individuals, they target enterprises because the payout can be bigger than scamming a single person.
However, in true “work” fashion, scamming enterprises can require more work for scammers. They have to bypass security measures and trick professionals. However, that does not deter scammers from attempting to steal funds or information.
SMEs or Small to Medium-Sized Enterprises can fall prey to scams in numerous ways. This happens due to an even lengthier list of reasons. The simplest is the lack of knowledge regarding what to avoid and how to distinguish between a scam and a real business transaction.
Common types of scams that target SMEs
Scammers might not necessarily invent a new kind of scam but they learn to adapt old forms of scams in our modern world. Here are the classic scam types that SMEs are susceptible to:
SMEs can fall victim to phishing scams where they receive an email or message that appears to be from a trusted source, such as a bank or supplier. The message may ask the SME to provide sensitive information, such as login details or payment information, which can then be used to steal money or sensitive data.
SMEs can also be targeted by invoice scams, where scammers send fake invoices or payment requests that appear to be from legitimate suppliers or contractors. If the SME pays the fake invoice, the scammer will receive the payment and the SME will be out of pocket.
SMEs may also be targeted by investment scams, where fraudsters offer to invest in the SME or provide funding for a new project. These scams can be particularly dangerous, as the SME may be convinced to provide sensitive financial information or even give the fraudsters access to their bank accounts.
SMEs may also be targeted through social engineering, where scammers use psychological manipulation to trick employees or executives into divulging sensitive information or performing actions that benefit the scammer.
It is likely that you have heard of the scam types listed. The differentiating factor is the medium and technology that scammers currently use to conduct their illegal activities.
The cost of getting scammed
The financial impact of a scam on an SME can be significant, and can potentially even threaten the survival of the business.
The most obvious impact of a scam on an SME is direct financial loss. If the SME falls victim to a scam and loses money, this can have a major impact on the company’s cash flow, profitability, and ability to pay bills or meet other financial obligations.
In addition to the direct financial impact, a scam can also cause reputational damage to the SME. If customers or suppliers learn that the SME has been scammed, this can damage their trust in the company and make it more difficult for the SME to do business in the future.
Dealing with the aftermath of a scam can be extremely stressful and anxiety-inducing for an SME. The business owner and employees may feel overwhelmed by the financial and legal implications of the scam, and may experience anxiety about the future of the business.
Further, falling victim to a scam can also have a negative impact on the morale of an SME’s employees. If employees feel that the company has been victimised or taken advantage of, they may feel demoralised and less engaged in their work.
Best practices for safeguarding against scams
As small and medium-sized enterprises (SMEs) are becoming increasingly vulnerable to scams, it is essential for them to implement best practices to safeguard their businesses. It is even more important now more than ever to learn useful insights from the Macropay Scam Alert series.
Scammers often target SMEs, as they tend to have fewer resources and less sophisticated security measures in place. Therefore, it is crucial for SMEs to be vigilant and take proactive measures to protect themselves from scams.
One of the best practices for SMEs to safeguard against scams is to educate themselves and their employees about common scams and how to spot them. Training sessions and regular updates on current scams can help SMEs to recognise and avoid fraudulent activities.
Another effective strategy is to establish clear internal controls and procedures to prevent scams. This includes implementing proper authorisation processes for financial transactions, regularly reviewing financial statements, and conducting background checks on new employees.
SMEs should also be cautious when conducting business with new partners or customers. They should conduct due diligence checks, verify the authenticity of the parties involved, and avoid sending or receiving large sums of money without first confirming the legitimacy of the transaction.
Finally, SMEs should regularly update their antivirus and firewall software, as well as conduct regular data backups to protect their systems from cyberattacks. They should also have a disaster recovery plan in place to quickly respond to any security breaches or data loss incidents.
By implementing these best practices, SMEs can reduce their vulnerability to scams and protect their businesses from financial loss and reputational damage.
How to report a scam to the right authorities
Reporting a scam to the right authorities is essential in protecting yourself and others from falling victim to fraudulent activities. However, knowing where and how to report a scam can be confusing. Here are some steps you can take to report a scam to the appropriate authorities.
The first step is to gather all the relevant information about the scam. This includes the name of the company or individual involved, the date and time of the incident, any contact information you have for them, and any documentation or evidence you may have.
Next, determine the appropriate authority to report the scam to. This will depend on the type of scam and where it occurred. For example, if the scam involved an online purchase, you may need to report it to the Federal Trade Commission (FTC) or Internet Crime Complaint Center (IC3). If it involves a financial institution, you may need to report it to the Consumer Financial Protection Bureau (CFPB) or your state attorney general’s office.
Once you have identified the appropriate authority, you can file a complaint online, by phone, or by mail. When filing your complaint, be sure to provide all the relevant information and documentation you have gathered. You may also need to provide personal information, such as your name and contact information.
After filing your complaint, be sure to keep a record of your complaint number or reference number, as this will be important for future reference. It may also be helpful to follow up with the authority to check on the status of your complaint and provide any additional information if necessary.
Reporting a scam to the appropriate authorities not only protects yourself but also helps to prevent others from falling victim to the same scam. By taking prompt action and providing all the necessary information, you can help to hold scammers accountable and contribute to a safer online and offline environment.
Moving forward – post-scam recovery tips for SME owners
Small and medium-sized enterprises (SMEs) that have fallen victim to a scam can experience significant financial and reputational damage. Recovering from a scam can be a challenging process, but there are steps that SME owners can take to minimise the impact and move forward.
The first step is to report the scam to the appropriate authorities and take action to prevent further damage. This includes freezing any affected accounts, changing passwords, and notifying customers or vendors who may have been impacted by the scam.
Next, SME owners should review their internal controls and procedures to identify any weaknesses or vulnerabilities that may have contributed to the scam. They should also consider implementing additional security measures, such as two-factor authentication or encryption, to prevent future scams from occurring.
SME owners should also prioritise communication with their stakeholders, including employees, customers, and investors. Being transparent about the scam and the steps being taken to address it can help to rebuild trust and preserve relationships.
In addition, SME owners should consider seeking professional assistance, such as legal or financial advice, to navigate the recovery process. This can help to minimize the long-term impact of the scam and ensure a more successful recovery.
Finally, SME owners should prioritise taking care of themselves and their employees during the recovery process. Scams can be emotionally and mentally draining, and it is essential to take time to rest and recover.
Macropay Scam Alert in Conclusion
In conclusion, recovering from a scam can be a challenging and complex process for SME owners. However, by taking prompt and proactive action, implementing additional security measures, communicating effectively with stakeholders, seeking professional assistance, and prioritizing self-care, SME owners can minimise the impact of the scam and move forward with confidence.
For more expert insights into combatting scams in the digital space, keep following the Macropay Scam Alert series by visiting www.macropay.net