Identity Fraud & Your Business

Recently, a lot of media attention has been given to identity theft. But in almost all of those cases the focus is on individuals being the victims. What isn’t being said is that businesses can also be targeted. It’s reported that in 2007 one in twenty businesses were victims of identity theft (with a large percentage of those being small businesses).

Many entrepreneurs are so focused on the basics of getting a business up and running—and making a profit—that they neglect to think through appropriate security measures. It’s estimated that only 10% of businesses have an incident response plan in place. With such a small percentage of businesses taking the threat seriously enough to create a plan of action, it is likely that even fewer companies (especially new companies) are taking appropriate prevention measures.

Maybe that’s because they don’t have a realistic idea of just how much harm an identity thief can do.

Identity Thieves Can…

• gain access to your business checking account
• set up new business checking accounts
• obtain credit in your business’ name
• steal client or employee information for fraudulent purposes
• sell client or employee information for fraudulent purposes
• do business in your name
• change your business name

These actions can result in decimated business credit ratings, large unauthorized purchases, ruined credibility, illegal business deals and fraudulent loans. As an entrepreneur, if your business is small enough—or the fraud is great enough—this could result in you losing your entire business and possibly some personal assets too.

If that’s not enough to cause concern, due to the recently enacted Fair and Accurate Credit Transactions Act (FACTA), business owners can be held liable and can be sued, fined and tried as defendants in  class action lawsuits if employee or customer identities are compromised as a result of theft from the business. Identity theft is no longer just an issue for civil courts, and businesses can be tried in criminal court simply for being negligent with sensitive information. 

How Businesses are Compromised

It’s estimated that 70% of security breaches occur because of personal data theft by a corrupt and dishonest employee. But many seemingly innocent or routine things make up the remaining 30%: lost laptops, misdirected emails, human error, accidental disclosure of private information, etc…

Some identity thieves have even begun with the simple practice of forging company letterhead and posing as a business or as a “business partner” of a larger corporation. By doing so they used a company’s good name to establish trust (and sometimes gain access to credit) before defrauding both the company they posed as and the companies they did business with.

5 Ways to Protect Your Business and Yourself

With risks and consequences like the ones mentioned above, the stakes are incredibly high. Protecting your business should be one of the most important things about running your business. So, how do you go about doing that?

1. Shred all documents that have sensitive information on them once they are no longer necessary. Never leave a paper trail of important information lying around where just anyone can access it. Protect your business from falling prey to dumpster diving identity thieves who may view your trash as a gold mine, and snooping employees lurking around and waiting for the right opportunity to “lift” important data.

If shredding seems like a hassle because of the amount of paper you would need to destroy on any given day, employing a service like that offered by Shred-It (www.shredit.com) might be of interest to you. Shred-It offers locked consoles you can keep in your offices, and industrial sized on-truck shredders that come by for regularly scheduled shredding sessions. Their staff must undergo strict security screenings and are all fully insured. However, if your business is still small and you only have a limited number of papers to shred you can always purchase your own shredder at your local office supply store.

2. Purchase advanced security software that uses firewalls and encryption. Paper is only part of the problem, so shredding alone will not protect your company from falling victim to identity theft. It’s important that all sensitive information your company acquires (whether it be from employees for payroll purposes or from customers or clients for business transactions) be kept only on computers that are secure. Firewalls and encryption features help prevent identity thieves from hacking into your system.

3. Routinely Check for any holes or breaches in your security systems. Many businesses wrongly believe that having a security system in place and having a security system in place that actually works properly are the same things. Unfortunately, they are not. As the business owner, make sure that you (or someone you trust) regularly schedule security checks of your system so that your company can be proactive about preventing identity theft.

4. Employ the use on online banking and payroll services. Javelin Research and Strategy estimates that these two simple acts could prevent 1 million cases of identity theft a year. Having everything available only online eliminates the opportunity for papers containing sensitive information falling into the wrong hands. A popular source for both small and large businesses alike is Automatic Data Processing, Inc. (ADP). They offer assistance with payroll and other human resources tasks like benefits distribution, retirement accounts, and other similar things. You can learn more about them at: www.adp.com.

5. Regularly run credit checks on your employer identification number (EIN) and your social security number (SSN). Just as individuals are encouraged to obtain copies of their credit reports periodically to make sure there isn’t any suspicious activity going on without their knowledge, business owners are encouraged to do the same thing. Regularly check to make sure that someone isn’t obtaining and abusing credit in your business’s name.

Identity theft is currently the fastest growing crime in America and it impacts 10 million people a year. One in twenty businesses was negatively affected by it in 2007. The government sees identity fraud as such a serious threat that new laws are constantly being enacted to help protect people from being victimized. You worked hard to establish your business, and you work tirelessly to keep it running. Make sure you also take the time to properly protect your business from identity theft so it can still be going strong well into the future.