Businesses Face Fraud Risks Within The Enterprise

The risk of fraud is often thought of among businesses as an external threat. Some anonymous bad actor on the dark web targets a company and demands a ransomware payment in exchange for freeing up company data, or an unknown attacker pretends to be a legitimate business partner in pursuit of company money.

While those risks remain prevalent among the business community, this week’s B2B Data Digest reveals just how prominent the threat can be from within a business itself. Cases of corporate card misuse, payroll fraud and an accounting scandal remind businesses that sometimes, their own employees or partners may be the weak link in their security.

4 out of 18 employees of a Kansas small business “claimed” unemployment despite still being employed by the firm, a case reported by a local Fox news outlet that is indicative of growing fears among small businesses over unemployment fraud. The incident likely involved identity thieves filing unemployment in the name of someone else. Small businesses are forced to address any mix-ups or fraudulent claims when unemployment is filed on behalf of employees still working at the firm, reports said, noting the Kansas Department of Labor had reportedly identified and halted 240,000 fraudulent unemployment claims. Fraudulent claims can also cause disruption in business, with this particular small business forced to shut down its website as a result of the fraud. The state’s House committee is now considering whether to make changes to its unemployment system, reports said, partly in an effort to protect small businesses that face higher tax payments when unemployment funds dwindle.

$165,000 was stolen from a corporate credit card, recent reports in the Daily Mail said, noting that an individual has pleaded guilty to fraudulent use of her boss’s company credit card. The case highlights the continued risk that companies face from their own employees when managers lack the necessary controls and visibility into card spend. According to the publication, the individual, previously employed by Suncorp, used the card on business class airfare and dinners, and reportedly began misusing the company credit card only six weeks after being hired by the firm. She resigned after the company detected a fraudulent invoice, reports noted.

$520,914 in B2B payments were redirected into a fraudster’s bank account in part of an international invoice redirection scheme, Irish law enforcement recently announced. Officials have charged an individual accused of operating the scam, which targeted businesses in Ireland, the U.K., Spain and Belgium. The individuals allegedly sent emails to businesses posing as legitimate suppliers with a request to change bank account details when the targeted company settled invoices.  Companies often were not made aware of the scam until the real vendor contacted them requesting payment on an invoice the victim believed it had already paid. According to reports in TheJournal.ie, the majority of those funds have been recovered.

$1.2 million in fines and penalties are hitting businesses in an Arizona town after a former employee allegedly committed payroll fraud, local reports revealed. The individual is the owner of Daystar Payroll, and is now accused of embezzling money from some of its corporate clients, leading the Treasury Department to issue fines against those businesses for failing to pay payroll taxes. Local police investigated the matter and have charged the individual with fraud, money laundering, theft and forgery, reports said.

$460 million is said to be owed to bondholders of China’s Luckin Coffee Inc., Bloomberg reported recently, noting that the company has filed Chapter 15 bankruptcy in New York following revelations of suspected accounting fraud within the firm. More than one-quarter of the business’s valuation may have been faked, reports said, though the company has not admitted to — or denied — findings by the Securities and Exchange Commission that the company intentionally inflated sales figures beginning in April 2019.