Common Business Scams and How Your Organization Can Avoid Them

Preventing Business Scams Image by Tech Prognosis

Business scams by con artists are not new and seem to be evolving every day. You probably already know about, or have had some experience with, the most common ones – robocalls about winning a prize, computer problems, quick credit fix etc. Sometimes, it is an “invoice” that is supposedly from a business partner.

And in some cases, a business scam can come in the form of debt-collection notices, or dire warnings about an expiring web address, domain name or trademark if you don’t send money immediately.

There have even been reports of business scams involving toner cartridges or other office supplies showing up at offices out of the blue with a bogus bill.

The common thread with all business scams is that they attempt to sow fear, play on greed or plea to the kind-heartedness of people.

According to the Federal Trade Commission (FTC), these business scams by con artists succeed because the criminals are banking on the likelihood that most small and medium-sized businesses, churches, and not-for-profit groups will end up paying the bogus invoices in the mistaken belief they owe money or that it’s simply a misunderstanding.

The devastating aftermath of successful business scams though, is that the savings of many businesses and organizations are plundered before the scam is discovered. And the sad part of it all is that many are never caught thus making the scam industry a multi-billion-dollar enterprise. Research put it at over $50 billion annually.

Here are some of the common business scams that could be directed at your organization.

  • The Directory Listing Business Scam

The directory listing scam is one of the most popular of business scams. In this operation, con artists will call a businesses or organization, claiming to “verify” or “confirm” a company’s contact information for its listing in a business directory. Of course, there’s no existing listing — and maybe not even a real business directory — but the employee who picked up the phone doesn’t know that.

Persuasive double-talkers bulldoze the employee into saying yes. Later, if the company complains it didn’t agree to the listing, the fraudsters may play back a tape of the call (which might have been doctored) as “proof.”

Next, the scammers send urgent invoices for hundreds of dollars. The invoices might even include popular symbols and names of advertising agencies like Yellow Pages or Yelp. In many cases, the person paying the bills will simply cut a check, not realizing that the company never agreed to pay the hefty fee for the directory.

When a business disregards the invoice, the bad guys up the ante by making collection calls and sending collection notices, piling on late fees and other penalties. The fraudsters sometimes even threaten to ruin the credit of the company or its owners and employees, to take them to court, or to refer the debt to a debt collector.

If companies stand firm in their refusal to pay for services they didn’t authorize, the scammer may try to smooth things over by offering a phony discount. Or they may agree to cancel the listing going forward to stop any new bills. At this stage, many companies pay up just to stop the hounding. What they don’t know is that they’ll likely get more bogus invoices — either from the same scam artist or from others who have bought their contact information for a new scheme.

Sometimes the first contact with the fraudster is through an advertisement sent by mail, fax, or email that asks the company to “verify” or “confirm” its contact information for a free listing service or a free social networking page. Fine print on the advertisement, however, may say that by returning the mailer or responding to the fax, the company is agreeing to an expensive business directory listing.

  • The Supply Swindle Business Scam

One of the most egregious of business scams is the office supply swindle. Every company needs office supplies, but small businesses and non-profits may not have a formal procurement process in place. So, when supplies show up at the door, employees pay for them, assuming a colleague must have approved the purchase. The delivery may include unordered merchandise or could even be an empty box empty.

Another trick is for con artists to call, falsely claiming to verify an existing order, and then tricking an unsuspecting employee into saying yes. That triggers high-pressure threats if the business refuse to pay. Either way, the company is left holding the bag — and the bill.

  • The URL Hustle Business Scam

You may have seen this in the mail or email: “Your web address or domain is about to expire if you don’t pay immediately to renew your registration.” For most small organizations without a dedicated technology team, that’s enough to send the CEO or “IT” stand-in into warp speed. Since the invoice emphasizes that time is of the essence, some businesses may tend to go the route of “pay first and ask questions later”.

Of course, the invoice isn’t from the entities that really handle things like that like your domain registrar or web hosting company. It’s from a fraudster, banking on the fact that companies with a web presence will be too busy to investigate, especially if they do not have a specialized or dedicated team handling technology matters.

In a variation on that scam, fraudsters send letters warning businesses that they’ll lose their trademarks if they don’t pay a fee immediately or that they owe money for additional registration services. Some are even bold enough to falsely claim an affiliation with the U.S. Patent and Trademark Office (USPTO), or some other agency. If your organization is a patent holder, the USPTO has advice for businesses on how to tell if a letter about trademarks real, or a possible rip-off.

  • The Charity Con Business Scam

As mentioned earlier, artists of business scams tend to plead to the good-heartedness of people, and many businesses make it a point to support worthy causes in the community. So, when a group claiming to help fire fighters, veterans, police, or kids asks a company to buy space in a calendar or publication, they’re happy to chip in. Scammers take that money and disappear.

These crooks cover their tracks by picking names confusingly similar to reputable charities, so it’s hard for businesses to find out they’ve been duped. The FTC has suggested steps to take before giving to a charity.

  • The Check Cheat Business Scam

This family of business scams take a direct approach to emptying your business purse by sending bogus bill, or cash advance checks.

Keep in mind that not all solicitations you get in the mail look like bills, invoices, or account statements. Your business may get something that looks like a refund or rebate check (with an official-looking “remove-stub-on-both-ends” package).

Read the fine print on the front and back carefully. By cashing the check, you may be agreeing to be billed monthly for something you don’t want or need, like Internet access or a listing in an online directory.

How You Can Protect Your Business or Organization From Business Scams

The FTC recommends taking the following steps to protect your company or organization from the kinds of fraud we discussed above:

  • Train Your Staff

Educate your employees about how these scams work. In addition to your regular receptionist, talk to everyone who may pick up the phone. Put a copy of this article in employee mailboxes. Mention it in a staff meeting. Post it on the break room bulletin board or where employees clock in and out.

  • Inspect Your Invoices

Depending on the size and nature of your business or organization, consider implementing a purchase order system to make sure you’re paying only legitimate expenses. At a minimum, designate a small group of employees with authority to approve purchases and pay the bills.

Train your employees to send all inquiries to this group. Compile a list of the companies you typically use for directory services, supplies, and other recurring expenses.

Encourage the people who pay the bills to develop a “show me” attitude when it comes to unexpected invoices from companies they’re not familiar with, even if those invoices list one of your employee’s names. Don’t pay for products or services you’re not sure you ordered.

  • Verify to Clarify

If you get a message that looks to be from a bank, credit card company, or government agency, investigate before responding. Using a phone number you know to be legit, contact the office directly to ask if the inquiry is on the up and up. Furthermore, many business directory scam artists are headquartered in Canada or in other foreign countries, but use post office boxes or mail drops to make it look like they are in the United States. Before paying, check them out for free at (link is external), and read the BBB’s report on them.

  • File A Complaint

If a business scammer is sending you bogus bills, speak up.

File a complaint with the FTC and with the Better Business Bureau (BBB). Complaints help shape law enforcement agenda, so it’s important to sound off when you spot a scam. Many business directory fraudsters who threaten to tarnish your credit if you don’t pay will simply drop the matter — and may even provide a refund — if they know you’ve complained.
If you think you’ve been victimized in a fraud scheme that involves the U.S. Mail, submit a Mail Fraud Complaint Form to the U.S. Postal Inspection Service.
Alert your state Attorney General. You can find contact information at the website of the National Association of Attorneys General (link is external), or check the blue pages of the phone book under State Government.

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Federal Trade Commission (FTC)
U.S. Postal Inspection Service