Sunday, March 11, 2007

If you own a small business it pays to be aware of scams and exercise due diligence

Individuals and eBay warriors aren't the only people being targeted by advance fee and overpayment scams. Businesses, especially smaller ones, are now suffering losses with ever increasing frequency.

The Association of Certified Fraud Examiners noted in their last report to the nation that small businesses suffer "disproportionate fraud losses," when they become a fraud victim.

Part of the reason for this is large businesses employ people to deal with fraud. The other part of the reason is they can't afford the exposure (as well as) larger businesses can.

Report, here.

Rich Mintzer ( did a pretty detailed article in January about how small business is targeted by fraudsters. He has some smart tips for business owners:
Smart Tip: Don’t ship any products to a buyer on a pre-paid basis unless you’ve done business with the company previously or can verify the legitimacy of its payment method.

Smart Tip: It’s better to be safe than sorry. Never send products or refunds to a first-time buyer until their check has cleared the bank.

Smart Tip: The bottom line is, if you haven’t seen a directory before and can’t verify that it’s actually distributed, you’d be wise to steer clear of any such offers.

Smart Tip: If it’s the vending machine business you’re interested in, do your own homework and contact companies you’ve done your research on. And be leery of local ads for new vendors that offer a toll-free number and a chance to make "big bucks."
Rich's tips (with more detail), here.

Michael Webster, an attorney practicing in Toronto, has an excellent site, which educates all of us on business scams:

Misleading Advertising Law (Due Diligence for Income Earning Opportunities).

A little awareness and (due diligence) can stop most fraud dead in it's tracks!


cary said...

Would it be considered unethical to "keep the change" if the check is part of an "overpayment" scam?

Ed Dickson said...

In most instances, your bank will come after you for the full amount when the item returns as fraud.

In some cases, they are cashed at a check casher, or Walmart. In this case their collectors are going to be after you.

Have noticed a lot of reverse scammers, who surf the Internet, answer the spam and get the items sent to them.

They then go out and cash them with no intention of ever wiring (sending the money) back to the scammers.

michael webster said...

Thanks for the kind words, Ed.