Fraud is one of the major concerns with businesses today, as there are many different types of scams, affecting either an organization or an individual. Understanding the types of fraud and how to prevent them is important in protecting your business.

In this article, we will describe several kinds of fraud: consumer fraud, identity theft, phishing, payment fraud, ACH fraud, and many others. We also offer practical recommendations on how to safeguard your business.

1. Consumer fraud

Consumer fraud involves practices that lead to financial losses, or even loss of possessions. Some scams involve misrepresentation, false advertising, and even cheating in transactions using false pretenses to make one purchase or release personal information.

Preventive measures include:

  • Educate employees and customers on common forms of consumer fraud.
  • Ensure that all transactions are done safely through verified payment gateways.
  • Implement effective return and refund policies that would engender confidence in customers.
  • Observe customer complaints for signs of fraud.
  • Regularly audit financial transactions to find out anomalies.

2. Financial fraud

Financial fraud can be defined as any scheme that intakes or manipulates the funds kept within it. Thus, payment fraud, fake invoicing, and unauthorized transfers all fall under this category. Financial fraud often causes critical losses and can plunge a firm’s reputation into ruin.

Preventive measures include:

  • Conduct regular financial audits to uncover irregularities.
  • Initiate multi-factor authentication (MFA) for financial-related transactions.
  • Monitor the access of an employee to all accounts and financial data.
  • Employ fraud detection software that flags suspicious transactions.
  • Train employees to be consciously aware of phishing attempts and suspicious requests.

3. Investment fraud

Investment fraud is a scam where a fraudster tricks an investor by offering a fraudulent or high-risk investment opportunity. Victims are promised high returns with very little risk, only to find that they don’t get any of their money back. Two examples of investment fraud are Ponzi schemes and pyramid schemes.

Preventive measures include:

  • Only invest in a well-researched opportunity.
  • Be suspicious of unsolicited investment opportunities.
  • Deal only with licensed financial analysts and verified platforms.
  • Avoid investments promising unusually high returns with low risk.
  • Ensure all investment deals are documented and legally reviewed.

4. Advance fee fraud

In advance fee fraud, victims are promised money in large amounts against a little upfront fee, and when the fee is paid, the fraudster disappears with the promised cash that never materializes. This can affect businesses when the procedure of loans or even vendor payments is held.

Preventive measures include:

  • Be cautious with the deals that want advance payments without assurance of guarantees.
  • Conduct third-party verification to check the authenticity of vendors and service providers before making the payment.
  • Be very cautious and never disclose personal or financial information to anonymous parties.
  • Be wary of red flags, like when asked to make a decision quickly or there are promises about returns rightfully guaranteed.
  • Report any suspicious requests to the authorities with immediate effect.

5. Identity theft

Identity theft is a crime wherein fraud is committed using the personal or financial information of another person. To businesses, it means stolen employee or customer identities used to commit fraud, which can easily bring about financial and reputational damage.

Preventive measures include:

  • Use strong and different passwords for all business and private accounts.
  • Enable MFA to provide additional security measures on accounts.
  • Encrypt sensitive data to prevent cyberattacks.
  • Regularly review accounts in search of unauthorized activity.
  • Educate employees about phishing attacks and how to avoid them.

6. Phishing

It is a form of cybercrime in which fraudsters send messages appearing to come from trusted parties in order to elicit sensitive information from the victim, such as usernames, passwords, and financial data. It is considered one of the most popular techniques for carrying out either payment fraud or identity theft.

Preventive measures include:

  • Train employees to identify phishing emails and suspicious links is key.
  • Block phishing attempts with email filters.
  • Keep security software up to date, including the firewall.
  • Implement protocols that can help in email authentication, such as SPF, DKIM, and DMARC.
  • Encourage employees to report any phishing attempts that might occur.

7. Smishing

Smishing is a form of phishing that uses SMS messages to attempt to deceive recipients into giving out their personal information. Cybercriminals can feign being any real business or organization to entice victims into undesired clicks or leakage of critical information.

Preventive measures include:

  • Educate employees and customers about tactics used in smishing.
  • Avoid the usage of links from senders that are unfamiliar.
  • Such malicious messages can be detected and blocked using security software for mobiles.
  • Report unusual texts to your mobile carrier.
  • Encourage using MFA for mobile accounts related to business.

8. Vishing

Another form of phishing is vishing (voice phishing), where robbers attempt to deceive people using telephone calls to steal their personal information. Scammers normally request confidential data by posing as genuine businesses, agencies, or government agencies.

Preventive measures include:

  • Train employees not to give out information until they have identified the callers.
  • Bottleneck calls through call-blocking software that screens out known fraudulent numbers.
  • Remind employees to never disclose sensitive information over the telephone.
  • Attempts at vishing should be reported to your telephone carrier and to the police.
  • Utilize a corporate policy of dissuading employees from discussing sensitive data over the phone.

9. ACH fraud

Automated clearing house (ACH) fraud occurs from fraudsters manipulating electronic transactions—such as direct deposits or wire transfers—for illicit gains. Businesses that use ACH to make and receive payments are a continuous target of cybercriminals that take advantage of the vulnerabilities within these transactions.

Preventive measures include:

  • Perform effective internal controls for ACH transactions.
  • Only use MFA for any account managing ACH payments.
  • Monitor accounts for unusual or unauthorized transactions.
  • Set up notifications in the event of any changes in the particulars of payment or recipient details.
  • Periodically publish updated security procedures for the use of electronic payments.

10. Account takeover fraud

Account takeover fraud generally involves unauthorized entry into either a business or customer account, which is most prevalent through phishing and smishing frauds, malware attacks, etc. Having gained entry, money can be stolen, fake purchase orders made, or the account can be abused for subsequent frauds.

Preventive measures include:

  • Enable MFA on all business and customer accounts.
  • Check accounts regularly for suspicious login attempts.
  • Encourage strong and unique passwords for employees and customers.
  • Train employees to recognize attempts at account takeovers.
  • Employ IP-based security to flag suspicious locations of access.

11. Credit card fraud

Credit card fraud is the theft committed by an individual using stolen information from a credit card or the card itself to make unauthorized purchases or withdrawals. Credit card fraud can easily be committed on any business that takes credit as a means of payment.

Preventive measures include:

  • Use secure, PCI-DSS-compliant payment gateways.
  • Perform fraud detection using appropriate software by flagging transactions characterized by suspicious activities.
  • Require CVV codes for each credit-card purchase.
  • Encourage customers to report lost or stolen credit cards immediately.
  • Upgrade your payment processing on a regular basis to ensure your security standards are compliant.

12. Business email compromise (BEC)

Business email compromise is a sophisticated fraud where cybercriminals hack into email accounts to impersonate executives or employees. Once inside, they trick others within the organization into transferring funds or sharing sensitive data.

Preventive measures include:

  • Enable MFA for all email accounts.
  • Keep email security software and protocols updated regularly.
  • Educate employees on BEC tactics such as requesting fake invoices.
  • Verify the request for payment through a series of multiple channels and then move the funds.
  • Flag email account unusual activities.

13. Internet greeting card scams

Internet greeting card scams include all those fake electronic greeting cards that contain links that install malware or spyware on that particular device of the victim once he/she clicks on it, thus compromising security.

Preventive measures include:

  • Verify the authenticity of unsolicited e-cards, particularly those coming from unknown senders.
  • Avoid linking to emails whose addresses you find suspicious or unfamiliar.
  • Use antivirus software to scan for malware and block potential threats.
  • Keep your operating system and browser updated to the latest version for security patches.
  • Report fraudulent e-cards to your email provider.

14. Online dating scams

Online dating scams involve fraudsters setting up profiles on dating sites or apps, luring victims in with the ultimate goal of soliciting money or personal information. Companies could be affected by such scams if those employees are using company devices for personal use, as corporate security is therefore compromised.

Preventive measures include:

  • Discourage posting personal information on dating sites.
  • Implement policies banning personal use of dating apps on business devices.
  • Any suspicious profile or user ought to be brought to the attention of the dating platform.
  • Train employees to identify common online dating scam tactics. 
  • Use device management software to keep a tab on corporate device usage.

15. Lottery fraud scams

Lottery fraud scams deceive victims into believing that they have won some type of lottery and that, in order to receive the money, some kind of fee is necessary. This could be relevant to businesses when scammers target their employees. 

Preventive measures include:

  • Educate employees on the fact that there is fraud regarding lotteries. 
  • Verify the authenticity of unsolicited messages claiming to congratulate you on your lottery wins. 
  • Do not click on any link that might be suspicious or disclose your payment information to anyone. 
  • Report fraudulent claims of lottery winning to the proper authorities. 
  • Block such messages to users using spam filters.

How Verimatrix XTD protects against fraud

Being aware of how fraud works and of the many varied types out there—identity theft, phishing, ACH fraud, account takeover fraud, and others—can only lead to better protection of sensitive information. 

Verimatrix XTD is a comprehensive solution that offers such advanced mobile app security features to protect against fraud. Using techniques such as code obfuscation, anti-tamper technology, jailbreak detection, root detection, and environmental checks, Verimatrix secures mobile apps from attempts of tampering and reverse engineering. 

Additionally, its agentless telemetry monitors threats in each device in real-time and detects suspicious activities likely to point toward fraud. Integration with SIEM platforms and AI/ML for predictive threat detection directly benefits fraud prevention, fraud detection, and fraud response. 

Talk with our specialists today and discover how Verimatrix XTD can ensure your app and business reputation stays clean of fraud accusations.