Fraud is as some claim as old as humanity itself and it’s not going to disappear any time soon. If you are a business, particularly a start-up business, being aware of fraud can reduce the risk of falling victim to fraud. The impact of fraud does not stop with revenue loss for the business. The effects could be catastrophic in terms of escalating complaints, poor customer experience, dissatisfaction among staff, and diminishing investor confidence.
Here are a few things, that we have heard and experienced that could help you be more fraud aware. I have written in the context of the Indian market but should broadly hold true for other markets as well. After all, the motives and modus operandi of fraudsters remain the same across borders.
Have strong controls over your books and finances. Have at least two levels of authorization for high value transactions and always have a competent Auditor review your money flows periodically. Start-ups often tend to immerse themselves in their ideas and let a financial or regulatory leak go unnoticed until it’s too late.
Check your bank statements and transactions as often as you can, preferably on a weekly basis and raise any red flags with your bank manager immediately. Most banks will come to your rescue if you act fast. Register for telephone authorisations of all your transactions and verify that nothing is amiss.
Beware of phishing emails that appear to come from friendly email addresses, banks, potential investors or even government agencies that seems too good to be true. Some scammers will even pressure you into making a quick decision. Needless to say, never part with your personal or bank details under any circumstances. As the saying goes, “if something seems too good to be true, it probably is”.
Handle cheques carefully. If you have an option, do away with cheques altogether. Most banks offer safe money transfers which can easily be tracked and traced if there is a problem. Once an engagement is over, delete the standing instructions and payee details from your bank account.
Don’t build business partnerships with people you seldom know. Getting introduced through a common friend or another business partner is a good sign but do a thorough background check on the individuals and businesses to see if they are legitimate. Never part with advance payments to start a service. If it’s unavoidable, take strong legal advice.
There is no such thing as risk free investment. The simple rule of thumb is: the higher the returns, the higher the risk.
Fraudsters come up with ingenious ways to defraud businesses in all sorts of ways. One of the things that you could do to protect yourself is arm yourself with information and always look over your shoulders.