While personal identity theft grabs headlines, corporate or business identity theft is an increasingly common crime that can wreak havoc on your livelihood. Thieves often steal a business' federal tax ID, Employer Identification Number (EIN), and use that information to open lines of credit, file fraudulent tax returns, and worse.
Statistics vary by source, but they all point to a rising trend in incidents of business identity theft. And small businesses are particularly at risk since they often lack the cybersecurity resources of larger organizations. But when a business' information is stolen, it can be difficult to correct the record.
What is business identity theft?
Similar to personal identity theft, criminals often pose as business owners, officers, or employees to steal cash, take out credit, and apply for loans, leaving the business with the debts. Perpetrators tend to cash out quickly and disappear, often going unnoticed until bills and collection letters arrive.
When the schemes are discovered, victim businesses must devote extensive time and resources to repairing the harm done to their finances, credit profiles, and reputations.
How to spot fraud
Identifying ongoing business identity fraud can be challenging, primarily because of the multiple strategies criminals employ. But knowing some of the schemes can give you a head start. Criminals will often:
- Change key information on your business registration
- Commit cybercrime and bank fraud
- Use stolen EINs to redirect your tax refund
- Pose as an owner or officer to guarantee a line of credit or new loan
- Rent space in your building and order goods under your name
- Manipulate credit reports and alter business-to-business credit data
- Hack computer systems and install malware, used to hide other fraudulent activity
The best rule of thumb to protect yourself is to be aware of your vulnerability, stay vigilant, and take nothing you spot for granted.
Preventing business identity theft
The best defense to preventing business identity theft is to have a strong offense. To thwart would-be thieves, consider:
- Go paperless. Have bank statements and other sensitive information sent to you electronically and avoid the mail.
- Shred. Dispose of financial documents with a paper shredder, so your critical information can't be found in a garbage can.
- Protect your data. Install a firewall, anti-virus software, and anti-malware software to keep out the bad guys.
- Educate employees. Make sure your employees understand the urgent need to protect against phishing scams and other methods used to gain access to your data.
- Watch your credit. Get a monitoring service to continually track your credit and business data that provides an early warning sign if something is amiss.
You should also plan to spend time learning all you can about the current state of business identity theft activity. The National Association of Secretaries of State maintains a comprehensive business identity theft website, businessidtheft.org, that you should keep on hand for easy reference.
What to do if you're a victim of business identity theft
If you find yourself in the unfortunate situation of being a victim of business identity theft, speed is your best defense. Take action to:
- Alert law enforcement of the crime.
- Report security breach to your bank to protect your accounts.
- Notify credit card companies that your account may have been compromised.
- Let your business partners, creditors, and suppliers know about your situation.
- Consult with an attorney to review your legal options.
In the end, being proactive may be the key to preventing criminal enterprises and their attacks on your business. Consider investing in business identity theft protection and stay one step ahead of the crooks.