Identity Theft And Businesses

Identity theft, scams, and fraudulent activities seem to be everywhere in our electronic, highly connected world. There are some things we can do to reduce our exposure to getting scammed, though.

Here's a video to demonstrate how easily a business can have their identity stolen.

Warning Signs Of Identity Theft

As an accountant and tax professional, there are things accountants can do to keep an eye out for their clients getting scammed or having their identity stolen.

Per accountingtoday.com, here are some of the warning signs an accounting professional might see:

• An electronically filed tax return getting rejected because the Social Insurance Number was already used.

• Client responds to emails the accountant didn’t send.

• Accountant is locked out of client’s accounting software unexpectedly.

• Notices from the Canada Revenue Agency (CRA) that don’t match what the accounting professional has done for the client.

Businesses can be susceptible to particular types of fraud or identity theft as well. One growing type of fraud is known as the Bust-Out Fraud.

Bust-Out Fraud

Per dnb.com,

"In a bust-out fraud scenario, the perpetrators create a seemingly legitimate company by using traditional “proofs of right” – registering with the Secretary of State, renting office space, and publishing a website, for example. Once established, the fake company applies for credit from multiple vendors, enticing them with the expectation of a mutually profitable business relationship. The fraudsters then draw upon the maximum amount of credit approved by each vendor. In a “straight-roller” bust-out fraud, the perpetrators make no attempt to pay. As their invoices go past due for 30 days, 60 days, 90 days, and so on, they may offer promises of payment or excuses while they complete their scam, but they never pay.”  

Material Misrepresentation

Material Misrepresentation is another common type of business identity theft scam. The scamming company uses a business name that is very similar to yours, so people can easily mistake the two companies (for example, Lethbridge Roofing Inc. versus Lethbridge Roofers Inc.). The scammers then use the similarity in company names to either trade on your company’s good name and get credit they don’t deserve (and won’t pay back), or to get your customers to pay THEM the money owed to YOU.

Your Best Defence Against Scammers

Your best defence against scammers is to do your research on companies you are doing business with or extending credit to, and keeping on top of your accounts receivable. You might not be able to collect a month’s worth of invoices from a fraudulent company, but losing a month’s invoices is better than losing three or six months’ worth of invoices.

Shaw & Associates doing your accounting and taxes for you is also a good practice – our accounting professionals are experienced with the process of establishing good vendors to extend credit to and keeping on top of receivables, and working with the CRA for your business taxes.

Contact Shaw & Associates Chartered Accountants for accounting help you can count on. One complimentary meeting with us will put you and your business on a more profitable and positive path.