One of the 20th century’s most prolific bandits, Willy Sutton, is noted for his glib response to a reporter asking why he robbed so many banks: “Because that’s where the money is.”

Fast forward a few years, and that simple truth still applies. But, in this case, it’s scammers taking small business owners for millions each year. The bad guys know that small businesses are “where the money’s at.” They know that small firms often lack the technology, systems and staff to fight back. And, in the end, it’s a vulnerability they are all too happy to exploit.

Here’s how it typically plays out:

1. Paper Pirates — A shady telemarketer is on the phone, knowing exactly what office products you typically purchase (copier paper, toner and maintenance supplies are the most common). In a permutation known as the “Pretender Scam,” the caller pretends to be your regular supplier, a replacement or an “authorized” supplier. Either way, the hope is that a harried staffer will agree to the order and, once the unordered merchandise arrives (complete with an unauthorized invoice), will agree to the charges without question.

Action: Train and prepare staff for handling these slick sellers. Require all sales to “go through purchasing,” whether you have such a department or not. Require all sales pitches to be in writing, and document each purchase with a purchase order and authorized signature. Just as important, if you receive supplies or bills for services you didn’t order, don’t pay. According to the Federal Trade Commission, you have a legal right to keep such merchandise as a “free gift.” However, the FTC recommends that you contact the company in writing and state that you didn’t order the item and, therefore, have a legal right to keep it for free. This may discourage the seller from sending you dunning notices — or may help clear up an honest error.

2. Directory Scams — Typically, scammers will call claiming they just want to “update” your company’s entry in an online or printed directory. The scammers then fire off a rapid series of questions they may record, sometimes sliding in a confusing reference to the cost. Other scams may include solicitations that use the name Yellow Pages, including the familiar “walking fingers” logo. Because the name “Yellow Pages” and the logo are not protected by any federal trademark registration, they can be used by anyone.  Later, you’ll receive a hefty bill for a directory that may or may not even exist.

Action: Train your staff to spot this scam — focusing on everyone who may pick up the phone. Compile a list of the companies you typically use for directory services. And encourage the people who pay the bills to develop a “show me” attitude when it comes to unexpected invoices from companies they’re not familiar with. If a scammer is sending you bogus bills, file a complaint with the FTC ( or 1-877-FTC-HELP).

3. Phishing/Pharming E-mails — Fraudsters use fake e-mails and websites to deliver malicious software, such as keystroke loggers. Common examples include e-mails pretending to be from the IRS claiming the company is being audited, or e-mails claiming to be from the Better Business Bureau® saying the company has received a complaint. They then use responses to obtain user names, IDs and passwords for online bank accounts. Unfortunately, businesses are generally not covered by federal consumer protections against unauthorized electronic fund transfers, so a bank likely will not be responsible for reimbursing losses if negligence is shown on the part of the business, such as falling for a common scam.

Action: Equip your computers with up-to-date anti-virus software and firewalls (to block unwanted access). Make backup copies of critical business data on every computer. Also monitor account balances regularly, perhaps daily, to look for suspicious or unauthorized activity.

Source: FDIC’s Cyber-Fraud and Financial Crimes Section.


The information contained herein may not represent the views and opinions of Nevada State Bank or its affiliates.  It is presented for general informational purposes only and does not constitute tax, legal or business advice.