In 2024 alone, 80% of businesses reported that they dealt with attempted business fraud. It’s no secret that you need to be careful to avoid personal identity theft, but remember: a business can be a target too. Identity fraud against companies is rising fast, and even small firms are getting hit.

Fixing the damage of business identity theft takes time, but unfortunately, reputational damage can be irreparable. This guide explains how business identity theft works and how a company can protect itself.

What Business Identity Theft Means

Business identity theft happens when cybercriminals, often acting within a group, pretend to be a real company. Sometimes, an individual will pose as a business owner or executive, and with that false identity, they’re able to open accounts and take out credit fraudulently.

It feels intuitive to assume that fraud is only a risk for large enterprises, but the risk is high for small businesses, as they often have fewer checks in place. Problems can go unnoticed until a payment is missing or a vendor calls with a concern.

The Different Forms of Business Identity Theft

Criminals use several methods to steal a company’s identity, and it’s important to be aware of all of them. Different methods are appearing every year, but most commonly, fraudsters use the following:

  • Opening credit lines or loans under the business name, and cashing them into their own accounts
  • Taking over or copying a company’s website, forcing the real company to pay to get it back
  • Filing fake tax bills and refund forms to redirect money or take control of business records.

How Criminals Pull It Off

So, how do criminals manage to pull off such large-scale fraud? Many attacks start with phishing. A criminal will send an email that looks like it came from a boss or business partner, with the message linking to a fake login page. Once an employee enters their details, the criminal has access to real accounts.

Other scams skip the initial login stage. For instance, the scammer may pretend to be a vendor and “confirm” new bank details. Payments will get sent to the wrong place before anyone notices, and then it’s already too late to take action. Alternatively, some attackers file fake updates to public business records, which can change addresses, ownership, or tax information.

To prevent business identity fraud from happening, clear audit trails are essential. Nowadays, software platforms exist to help, enabling businesses to automate audit verification through detailed activity logs and notifications.

Signs Your Business May Be a Target

While fraudsters go to great lengths to cover their tracks, they usually still leave clues. To catch business identity fraud before it occurs, a company should pay attention to:

  • Credit checks that it did not request
  • Clients who report invoices they never received
  • Vendors who ask about payment changes that no one made
  • Login alerts from new devices or unfamiliar places
  • Drops in domain reputation or reports of spoofed emails
  • Strange filings that appear in public business records

Ways to Reduce the Risk

Thankfully, there are many simple habits and workflows that a business can adopt to protect itself from business identity fraud. Automation can help, but only when paired with strong rules and checks. Otherwise, it can have the opposite effect.

Secure Vendor Onboarding

Firstly, every vendor should go through the same SOP before being added to a business’s system. Every detail should be verified, and all approved contact methods should be kept on file. This blocks fake vendors from slipping into inboxes.

Cyberattack Insurance

Risk mitigation is ideal, but it’s still wise to be prepared for the worse. In the event that a company does fall victim to business identity theft, a disaster can be significantly mitigated through cyberattack insurance. It helps businesses recuperate the costs of dealing with a cyberattack, helping them get back on their feet as soon as possible.

It’s also useful to educate your employees on individual identity theft protection service, as this helps them understand how to safeguard their personal information if a breach happens.

Clear Payment Verification

Any payment or bank detail change should pass a two-person approval without exception. It only takes a few moments to make a quick callback to a client or vendor, and just like that, you can confirm that a request is real.

Strong Access Controls

While it might seem efficient or more economical, software accounts should never be shared between employees. MFA should be on for every user, and when someone leaves the company, their access must be removed at once.

Routine Checks

As was previously touched on, business process automation can be invaluable. However, it shouldn’t ever replace regular reviews. Regardless of automated SOPs, a business should routinely check its domain, run invoice audits, and keep an eye on vendor lists. Furthermore, public business filings should be reviewed for unauthorized changes.

What to Do If Fraud Happens

Hopefully, the steps outlined in this article will help you to avoid business identity fraud altogether. If the worst comes to the worst, remember that quick action limits the damage.

In such a case, a business should immediately freeze affected accounts and warn vendors. Then, it should gather copies of any fake documents, alert credit agencies, and verify its public filings. If all else fails, cyberattack insurance can cover many of the financial losses of business identity fraud. It can’t repair the full damage, but it still keeps the situation from becoming a full-blown crisis.