Financial Fraud Awareness: Protecting Businesses from Fraudulent Activities
Financial fraud refers to any act of deception aimed at obtaining money or assets through unfair or illegal means. This type of fraud can manifest in various forms, often involving trickery to persuade individuals or businesses to relinquish valuable information or funds. For Micro, Small, and Medium Enterprises (MSMEs), scams associated to business loans can be particularly detrimental, risking both financial stability and the reputation of the business.
Common Types of Financial Fraud Affecting MSMEs
1. Funding Scams
Funding scams involve fraudulent entities that pose as legitimate lenders or investors, often targeting businesses or individuals in need of financial support. These scammers promise quick funding in exchange for upfront application processing fees, personal information, or fake collateral. Once the payment is made, the scammer disappears, and no funding is provided.
Signs of Funding Scams:
Requests for upfront payments:
Scammers often ask for application processing fees or other payments before any funds are disbursed. Legitimate lenders or investors typically deduct fees from the loan or investment amount rather than requiring them upfront.
Unrealistic promises of rapid funding:
Offering quick loans or investments without proper vetting or credit checks. Genuine lenders take time to assess risk and financial stability before offering funding.
Ambiguous terms:
Loan agreements or investment offers that lack clear terms, including repayment schedules, interest rates, or other critical details.
Lack of verifiable references or contact details:
The funding provider may have no verifiable references or proper contact information (e.g., a vague email address, no office address, or unresponsive phone numbers).
Steps to Protect Against Funding Scams:
Avoid upfront payments:
Avoid paying application fees without proper formal documentation. Also, do not pay on the individual’s personal bank accounts or Gpay/Paytm, etc.
Check for proper licensing:
Verify that the lender or investor is properly licensed or registered with relevant financial authorities (e.g., the Financial Conduct Authority or equivalent).
Research the provider:
Look for reviews, ratings, or feedback from credible sources to check the legitimacy of the funding provider. Also, check their references and ensure they have a physical office or contact information.
Review loan agreements:
Always review loan agreements or investment offers carefully. If terms seem unclear or too good to be true, it could be a scam. Consult with legal or financial professionals before signing anything.
2. Identity Theft
Identity theft occurs when personal or business information such as financial details, or login credentials of the individual are compromised by unlawful means to commit fraud or access financial resources.
Signs of Identity Theft:
Unexplained financial activity:
Unauthorized transactions or withdrawals
Missing important documents:
Sensitive documents, such as tax records or business IDs, are lost or accessed without permission.
Unexpected credit inquiries:
Notifcation of credit applications or loans opened in your name that you did not authorize.
Inaccurate credit reports:
Discovering unknown accounts or loans in your credit report.
Steps to Protect Against Identity Theft:
Monitor financial accounts:
Regularly check your bank and credit card statements for unauthorized transactions.
Secure sensitive data:
Use strong passwords, multi-factor authentication (MFA), and encryption to protect business and personal data.
Shred sensitive documents:
Shred paper documents with financial information before discarding them.
Consider credit monitoring services:
Use credit monitoring to receive alerts for any unusual credit activity linked to your business or personal identity.
3. Business Email Compromise (BEC)
BEC is a form of cybercrime where hackers infiltrate a company’s email system to impersonate executives or trusted contacts. The fraudsters may then instruct employees to transfer money, share sensitive data, or engage in other harmful activities, often leading to significant financial loss or data breaches.
Signs of Business Email Compromise (BEC):
Impersonation of trusted contacts:
An email from an executive, employee, or trusted vendor requesting urgent financial transfers or confidential information.
Suspicious email addresses:
The email address may look similar to the legitimate one but with subtle differences, like extra characters or a different domain. To seem legitimate, scammers might change the spelling of the company slightly. For example: (name)@protiium.co.in, or create fake email ids with duplicate domain names
Change in communication tone or method:
The request may be unusual for the sender, such as using an informal tone or by-passing normal business procedures. Scammers might also create undue urgency.
Request for secrecy:
Emails may ask for transactions to be kept confidential or bypass normal protocols for approvals.
Steps to Protect Against BEC:
Verify the request:
Always double-check unusual requests, especially those involving money, by contacting the sender directly through a separate communication channel (e.g., phone).
Use email security measures:
Implement relevant network security protocols to protect against spoofed emails and ensure your company’s email system is secure.
Educate employees:
Regularly train staff to recognize suspicious emails, verify email authenticity, and report any suspicious activity immediately.
Steps to Take if Fraud is Suspected
Quick action is critical if fraud is suspected:
Immediate Actions:
Report the incident with the police or The national cybercrime helpline number – 1930. You can also report cybercrimes through the National Cyber Crime Reporting Portal.
Reach out to Protium if you come across any person impersonating the company on our customer support number +91 882 882 0004 and email customerservice@protium.co.in
Change passwords immediately if accounts are compromised and enable MFA.
Document all communications related to the fraudulent incident and report this to authorities.
Protium’s Commitment to Financial Security
Protium prioritizes a safe environment for MSMEs by adhering to stringent security standards and collaborating with trusted partners. Continuous monitoring for potential fraud risks ensures that all transactions are conducted transparently and with integrity. For assistance regarding suspected fraudulent activity, contact Protium directly: