Routinely, business reporters and media journalists will detail why a business failed. They will talk about how the business was undercapitalized, they will discuss how the management of the business was inexperienced, they will discuss why the product was either ahead of its time or its time has passed, they will discuss how the business had little capital to truly market/operate, they will discuss how the location of the business was poor in terms of where it was situated, they will discuss how the structure of the business was improperly aligned, and more.
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But what you rarely see discussed is how a lot of small businesses are failing today due to identity theft. Identity theft is one of the most profitable crimes for thieves as it carries a low risk of them being caught, with a potential 6 figure pay-day if the transaction goes as planned.
When it comes to business identity theft, the procedure is more streamlined for the crooks as there aren’t as many mediums and protections in place for businesses as there are for consumers. Literally weeks or months could go by before the small business owner finds out that there’s new business credit cards, business loans, or other debt that were taken out by the identity thief.
For this article, I wanted to touch on this subject in more detail and offer recommendations to help keep your business from failing due to identity theft.
How Your Personal or Business Identity Is Stolen
There are a number of ways thieves can steal your business’s identity, and perps are coming up with new and creative ways to do so online. These include but are not limited to:
- Phishing. This is an email that prompts you to provide personal or business information such as company bank account info or personal and business credit card numbers. These emails are usually disguised as a legit email coming from a real organization. Don’t click on links in these fishy emails, and be careful about what personal information you’re giving up.
- Unsecured web transactions. We all use our cards for online purchases, and you probably do so for your business too. If you’re making a transaction online there’s a chance a thief could intercept your personal or business information. If you’re giving up personal information, make sure it’s via a secured connection and monitor your credit card transactions online.
- Mail theft. This can come in a few forms—a thief intercepting important documents being mailed to you or your business, like tax forms. Another type of scam involves sending invoices via mail to be paid that aren’t for real services or products provided. If the invoice doesn’t seem familiar and is asking for immediate payment, that’s a big red flag.
Check these 5 common business scams to make sure you’re preventing specific types of business theft.
The industry in which I work is one that deals with scammers and ID thiefs all the time. What amazes me about the merchant services industry, which I’ve been a part of since 2007 offering merchant processing and financing solutions, is that there are no checks and balances in place in terms of who is reselling these services on an independent basis. There are no licensing requirements, no education requirements, no requirements to have previous sales experience, no certification requirements, and there aren’t even background checks being done on these individuals. These reps are going out into the field and getting access to sensitive data from merchants, including their:
- Social Security Number
- Date of Birth
- Home Address
- Bank Account information
- Tax Return information
- Financial Statement information
As a small business owner, you have to protect yourself. Be very careful to whom you release your sensitive data, such as vendors and suppliers. Conduct your own research, background checks, and internet searches. Look for LinkedIn accounts to verify their existence, ask for references, and, if it’s a company you’re working with, check their business credit reports to make sure there aren’t any red flags. (You can check the reports of up to 5 companies with a Premium Plus Nav account.)
Consequences Of A Stolen Identity
Because you’re a small business owner, no matter if your personal identity or the identity of the business is hacked into, the effects will be remotely the same:
- Your bank accounts hacked into and/or frozen
- Your credit lines hacked into and/or frozen
- Your business credit rating destroyed
- Your business reputation destroyed
- Your business partnerships destroyed
- Your business revenue decreased
- Your potential failure to cover payments, expenses, and payroll
Preventing Against Identity Theft
Following the steps below will help insure you against personal and/or business identity theft:
- Only do business with vendors, suppliers, consultants, etc., that you know, trust, have verified, and have confirmed do not have security weaknesses in their systems.
- Review your personal and business credit reports often. You can sign up for a free Nav account to see your reports for free, plus get free monitoring and alerts when your credit changes. A Premium account includes up to $1 million in identity theft protection.
- You can sign up for additional personal credit monitoring for free from sites like CreditKarma or Credit Sesame.
- Use quality anti-virus technology and firewalls, such as products from Norton, to scan your technologies at least 4 to 5 times per week to catch/remove viruses.
- Shred all paper documents with sensitive information that are no longer needed. Although web-based identity theft is the new hip thing, dumpster diving for sensitive documents isn’t a thing of the past.
- Keep all of your personal and business records in secure places. Only allow access by people who are trusted.
If You Become A Victim
The moment you become aware of the situation, immediately activate any identity theft protection insurance that you have available, get an attorney as well as the police involved immediately.
Place a fraud alert on all of your personal and business checking, savings, credit line, loan, and other related accounts. Contact all of your vendors and partners to make them aware of the situation.
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