As Crime Grows More Sophisticated, Knowledge is Power

by Jerry Leemkuil, Association Risk Management Services, Federated Mutual Insurance Company

Crime has changed. The days of thieves as shadowy figures skulking around and looking for a quick buck are over. Criminals’ methods are more sophisticated and their ambitions are grander than they have ever been. They employ tactics so sly and tech-savvy that their victims sometimes participate in their crimes and don’t even realize it before it’s too late. One key thing hasn’t changed: Thieves are opportunists looking for easy targets. That means you need to arm yourself with information to help reduce your chances of falling for a criminal’s schemes.

The U.S. Federal Bureau of Investigation estimates the cost of recovering from cyberattacks in organizations of all types and sizes to be in the billions1. The depth and breadth of cybercrime means that any business that is connected to the internet or stores information digitally is at risk.

Among the common schemes are:

  • A criminal will send an email that contains a virus, and demand a sum of money to remove the virus.
  • Denial of service. An extortionist will flood a website with traffic, effectively shutting it down, and demand payment to end the attack.
  • Card skimming. A criminal will install a device on a business’s payment card reader, stealing financial information.

The hidden nature of cybercrime makes fighting it difficult once it occurs, so strengthen your defenses. Consider consulting with a cybersecurity firm, which can help you test your system, detect threats, and make a plan to respond to an attack. Your employees are one of your best lines of defense. Train them to detect a phishing email or other scheme.

False Pretense and Conversion
False-pretense and conversion thefts take advantage of a business’s good will toward customers, and are common at businesses that sell goods directly to customers at retail sites. In these schemes, a thief will find a way to exploit a business’s procedures, or otherwise trick them into giving up information, cash, or merchandise. False-pretense thieves will take their prize and disappear before anyone realizes a crime was committed. They’re looking for merchandise they can easily move and sell. Popular techniques include using fraudulent payment methods, such as a bad check or stolen credit card. In another version of the false-pretense plot, a thief will swap delivery instructions on another customer’s purchase.

To help combat such schemes, employ smart practices.

  • Where lawful, check customers’ IDs. Ensure the photo on the ID matches the customer. Check the address. If it isn’t local, this might be an indication that a scam is in the works.
  • Ensure that checks have sufficient funds to cover the bill. If you don’t have access to equipment with the appropriate capabilities, consider refusing to accept checks altogether.
  • Keep a close watch over all documents, including delivery orders. If they are always in your possession, a criminal won’t have an opportunity to tamper with them.
  • Increase the chances a thief will get caught. Consider security cameras where laws allow. The more conspicuous your setup, the better.

Wire Fraud
Wire fraud scams employ electronic communications. A fraudster will contact a business via phone, email, fax, social media, or text message, and request money or information that gives them access to a victim’s finances. These types of attacks can be customized to take advantage of a specific target, or be part of a larger campaign. Some communications appear authentic, even imitating legitimate communications the business has previously received. Their methods can be varied and difficult to detect, but they are all designed with one goal: to trick victims into willingly parting with their money.

To help reduce your vulnerability to such schemes, consider these strategies:

  • Ensure that someone in your company was expecting an invoice before paying it, and confirm all invoices with verified contacts within companies with whom you do business.
  • Require that all payments released by your employees be confirmed and approved by another team member or manager.
  • Never comply with electronic communications requesting bank information. Contact your vendors via phone to verify the request is legitimate.
  • Advise your customers and vendors that you will never request a change to your bank or billing information via email and to contact you immediately if they receive such a request.
  • Prohibit employees from releasing business financial information via social media.
  • Train your employees to recognize potential wire fraud schemes. They’re more common than you might think — and they are better disguised than you might expect.

What if My Business is a Victim?
If you suspect that your business was a target or victim of any type of crime, contact your local authorities immediately. Save any correspondence you have with the would-be fraudsters — provided it doesn’t endanger your data — to assist law enforcement in their investigation.

Insurance Coverages and Risk Management Resources
No single coverage protects from all types of theft, so review your policy with an insurance professional to make sure your coverages account for your risks. Even if you have adequate insurance, the best way to protect your business is to help stop a crime before it happens. Federated Insurance® offers an array of tools to help. Find your marketing representative to discuss Federated Insurance’s risk management resources that can help you fend off would-be thieves — and help your business recover if a thief strikes.

1“Cyber Crime.” Federal Bureau of Investigation. Accessed July 16, 2020.

This publication is intended to provide general information and recommendations regarding risk prevention only and should not be considered legal or other expert advice. The recommendations herein may help reduce, but are not guaranteed to eliminate, any or all risk of loss. The information presented may be subject to, and is not a substitute for, any laws or regulations applicable to your business. Qualified counsel should be sought regarding questions specific to your circumstances. © 2020 Federated Mutual Insurance Company. All rights reserve