Canada is one of the safest places to live and work, but you’d be surprised at the amount of crime and fraud that takes place. Many entrepreneurs don’t take fraud prevention into consideration and, as a new start-up, your company is an easy target.

Before you scoff at the idea and think “it’ll never happen to me,” consider that one in every five small businesses have been victimized by fraud, according to the Canadian Federation of Independent Businesses. Your firm can very easily become one of them if you don’t take the proper precautions.

There are five common types of fraud that happen to small businesses:

Credit card fraud causes millions of dollars in losses annually. As the operator of a new business, the last thing you want to do is to make a sale and later realize that you gave away your products to a scammer and got nothing in return. Using a chip-activated payment device will prevent someone from using a stolen credit card and it can additionally detect counterfeit cards, as the chip generates a unique code that counterfeit cards can’t replicate.

Directory fraud takes several guises. One is when you receive an invoice for a service you didn’t receive or a directory listing you didn’t ask for. The invoice may look like it is from a legitimate company, perhaps one you know, however it often has a slight variation that can be a flag indicating its origin is suspect. Another form of directory fraud is when your business is offered “free” advertising by email or fax, and you are subsequently billed for the service. Yet another form of fraud is when your business receives a box of office supplies it didn’t order; there is often fine print accompanying the package which states that the act of opening the box serves as your agreement to pay for the contents – usually for an inflated price. Protect your business by being vigilant and observant when looking at invoices, and never open any packages you weren’t expecting. When contacting the company for more information, don’t use the number it provides. Conduct a search yourself online.

Occupational fraud happens within the organization itself – an inside job, if you will. This could be an employee changing details on cheques so they are able to cash them, sending payments to their personal account or falsifying payments in any form. Protecting your company from internal theft requires due diligence early in the hiring process. Background and reference checks can help you get an idea of the people you are hiring. Setting clear policies and conducting training will establish expectations and allow for clear communication and awareness between you and your employees. 

Regulatory fraud is when your firm is solicited by a company pretending to be the government and contacting you in regard to occupational health and safety regulations. The perpetrator may be trying to sell you overpriced first-aid kits by insisting they are mandatory, or by convincing you that you need to buy health-and-safety training for your team. Always verify through another source whether these “government regulations” are accurate and necessary. And keep in mind that the government will never call your business to sell you a product or service.

Deposit fraud is found mainly in the banking industry but it is good to be aware of, regardless of your industry. Scammers receive a cheque, deposit it digitally through online banking and then attempt to deposit it again in person at their financial institution. There are even instances of employees  attempting to deposit their paycheque twice. Most financial institutions have measures to prevent this from happening. It’s also important to train your employees to take precautions when dealing with cheques from customers: Have your employees take down personal information from the payee in case the cheque proves to be fraudulent.

The Competition Bureau Canada has released a guide called The Little Black Book of Scams that is designed to bring awareness and help you avoid becoming a victim of illegal activity. The guide covers several types of common scams, tips on how to avoid them, and contact information for the reporting of suspected illegal activity to the correct authorities.

If you do suspect fraud, report it as soon as possible. The Canadian Anti-Fraud Centre and the Competition Bureau are good contacts to keep handy.

It’s better to be safe than sorry. Scammers are a threat to your business and can do a lot of damage to your financial situation, your reputation, and your company morale. Take precautions and remain vigilant.