By Eric D. Morton
This year, several of our clients have been targeted by sophisticated scam artists. We have also heard or read of other similar fraudulent schemes. There is a growing trend of sophisticated scams targeting small businesses.
Some fraud schemes have been around for years. Fake office supply orders, offers to list a business in a non-existent directory are common scams. Owners of corporations are sure to get fake but official looking “Corporate Compliance” notices. Every owner of a registered trademark gets fraudulent offers to list the trademark in an “official” directory. Trademark owners also receive fraudulent and over-priced offers to renew their trademark registrations long before their registrations are due for renewal.
Recently, the fraud schemes have taken a more sophisticated and sinister turn. Scam artists have begun specifically targeting small businesses. They are not using one-off techniques but are learning about a business and its owners before trying to defraud the business. Owners of companies have received emails specifically addressed to them by name and referencing particular business operations of their company. Scammers pose as vendors, customers, clients, and law enforcement. The goal of these scams is to either cause the business to pay or send money under false pretenses or to give up personal, financial or confidential information.
Scammers are using public records and company websites to learn about companies and their owners. In this way, they can tailor their approach to the owners of the company. Scammers hacked into companies’ email accounts in order to discovery the customers, vendors or clients of a business. Other scammers placed sophisticated viruses on company computers for the same purpose. Scammers posed as law enforcement officers, the Internal Revenue Service, the courts, major corporations in order to frighten business owners into cooperating with a fraudulent scheme. We know of scammers brazenly calling business owners and claiming to be such law enforcement agencies such as the FBI.
In the past, these techniques were used to defraud large and medium sized companies of large sums of money, or steal their trade secrets. Now, they are being used to defraud small businesses. The amounts of money being stolen are usually in the tens of thousands of dollars – which is not much compared larger scams but is a disaster for a small business. The sophistication and the effort made by the scammers is surprising. Small business owners don’t think that they could be a target.
In keeping with these times, companies with physical assets are being targeted. Individuals are identifying and watching companies in order to steal their equipment or supplies. Many building contractors in California have had vehicles containing valuable tools stolen. They were being watched and tracked to job sites by thieves. Sometimes vehicles were stolen when left unattended for a few minutes. The vehicles are usually recovered by the tools are gone. In the past, theft by third parties was usually done against large construction sites or companies with large equipment yards. Now, thieves are targeting small contractors and businesses.
What to do
- Cyber security. Use good anti-virus programs and change passwords frequently. Don’t click on attachments and links in emails even if they appear to be a from a known source unless you were expecting such an email.
- Verify identities. Before paying a bill or sending money to third party, verify the bill, the identity of the party and the method of payment. This is particularly true if you receive an invoice, demand, “official notice”, from a third party. Call the agency or company.
- Verify any change in payment method. This is a common scam. A scammer posing as a vendor or client will request a wire transfer or other change in the payment or transfer of money. Call that person or company and verify.
- Do not provide confidential or personal information. Anyone requesting your personal information or confidential information about your company is trying defraud you.
- Do not panic or act in haste. Scammers frequently rely on fear to induce their victims to quickly and hastily. Nothing needs to be done today. Call an attorney if anyone threatens legal action against you.
- Secure physical property. Lock up offices, vehicles, job sites, equipment yards, etc.
- Educate your employees. Teach them that they must assume they are being watched, electronically and physically.
Finally, be vigilant. Don’t assume you are not being targeted and watched because you are a small business. Every victim can’t believe that someone went to the trouble to target them.
Eric D. Morton is the principal attorney at Clear Sky Law Group, P.C. He can be reached at emorton@clearskylaw.com, 760-722-6582, or 510-556-0367.