What to do if Your Company is the Victim of Fraud?
Updated: Oct 27
Florida has become the destination for many entrepreneurs looking to launch, expand or move operations. Among the reasons for this mass relocation is the perception that Florida is warm and friendly to business interests. No matter where your business is located, things may seem a lot less warm and friendly if your company is the victim of fraud. According to a report by PwC, 46% of companies surveyed reported experiencing fraud, corruption and economic crimes in 2022. Fraud works in a myriad of ways, including payroll fraud, asset misappropriation (including embezzlement), tax fraud, data and identity theft, and corruption. The possibilities are only limited by the perpetrators’ imaginations, and they are very creative in coming up with new schemes.
Preventing Fraud; Systems and Procedures
The best policy is to detect and prevent attempts to defraud your company. Monitoring and regularly reviewing financial records, not sharing sensitive financial information, limiting access and permissions, setting up checks and balances between different employees or departments, and calling creditors to confirm payment instructions are a few of the measures your business likely takes. Running background checks on employees that have access to sensitive information, credit reports and background checks on potential customers, and purchasing identity theft/ computer fraud insurance can further protect your business. Caution and following procedures in place will help you detect and prevent fraud before it works, but even the most careful entrepreneurs may find themselves the victims of fraud and will need to take mitigating measures. To learn some tips on how to safeguard your business from fraud, read this Article.
After Your Business is the Victim of Fraud
Once your company has been wrongfully deprived of sensitive information, assets, or capital, there are several important steps you need to take in order to mitigate damages, protect your company from subsequent attacks, and, hopefully, recover some or all of what has been taken. In hindsight, it all may appear very obvious – but do not feel worse for it – companies of all sizes are victims of similar schemes daily. The suggestions below are in no order of importance but acting quickly can make all of the difference.
Gather evidence of the fraud that was perpetuated.
Usually by the time that it is clear some species of fraud has occurred within your business, the point of entry for the fraudsters has been uncovered. Save all emails, messages, aliases, bank account information to a secure location. Gather dates and recreate the timeline of events. When this incident is reported to authorities and insurers, you want to ensure that you have documented the events as accurately and with as much detail as possible. In order to do this create a folder and a journal of the following:
Names, titles, positions and other pertinent information that those perpetrating the fraud used to gain confidence.
Any documents or informational material.
Write down details of conversations you had with the fraudsters.
Email addresses, websites, telephone numbers.
Copies of emails (with header information in native format, if possible) and screenshots of websites.
Invoices, receipts, statements, checks, bills of lading, and other information used to give the appearance of legitimacy.
Any correspondence, including envelopes.
Change passwords, permissions, account and email access.
Contact your IT administrator to change passwords, access, and take additional measures necessary to protect your company from subsequent attacks. Additionally, your IT admin can help you recover information that may have misappropriated by and removed from your network and cloud-based storage systems. Alert the accounts, services, and data systems that have been compromised – some of them may have a department dedicated to dealing with fraud.
Report the Crime.
Report the crime to the U.S. Department of Justice, the Federal Trade Commission, and the State Attorney General. Additionally, you will want to file a police report with the law enforcement agency with jurisdiction where the crime took place. How do you decide where the crime took place? If the fraud was conducted by means of email, phone or other remote means (examples of these would include payroll fraud, wire fraud, or fake invoices), then you would report the crime to the local law enforcement where your business is located. For crimes like check fraud where the check was deposited or cashed at a certain location or merchandise that was acquired fraudulently, the police department with jurisdiction over that location should receive the report.
File Insurance Claims.
Your company may have insurance policies in place that can cover this type of loss. Such insurance policies may include general business liability insurance, fraud insurance, fraud protection, crime insurance, and accounts receivable insurance. The coverage depends on the type of policy, its exceptions, and the facts of the incident. Be sure to file a claim with your insurer as soon as it is practicable as late reporting may affect your rights under the policy. The evidence you will present to the claims adjuster is the same that you presented to the law enforcement authorities and administrative agencies. Also keep in mind that the police copies of the police investigation and report should be provided to insurers.
Contact a Tax Professional.
Losses resulting from fraud may be deducted on your businesses federal income tax return for the year in which the loss is sustained. Any proceeds from insurance will be subtracted when computing the deductible loss. Keep all the records and evidence that you have amassed as this loss will have to be substantiated by proving: (1) the amount of the loss; (2) the date on which the loss was discovered; and (3) that a theft occurred under the law of the jurisdiction where the alleged loss occurred.
Speak with an Attorney.
Contact an attorney to speak to you about your rights and to guide you through this process. Attorneys are experts at gathering and organizing relevant information and framing it in terms that make it easy for authorities, insurers, and business associates to understand and act upon.
Each case is different and fraud can take many forms and has increasingly become difficult to detect. Likewise, there is not one path that one should follow in the aftermath of an attack, but following these steps and staying organized can make a great difference in the outcome for your business.
If your company has been the victim of fraud and you would like advice, the legal team at VAdam Law can provide you with expert guidance on your particular situation.
To learn more about VAdam Law and schedule a free consultation, visit our online scheduling portal or call 24 hours a day at (954) 451-0792.
 See Three Reasons Why My Company is Moving to Florida, Gilda D’Incerti, Forbes Magazine, https://www.forbes.com/sites/forbesbusinesscouncil/2022/06/22/three-reasons-why-my-company-is-moving-to-florida/?sh=1412e7415e9d (June 22, 2022); Florida’s Business Relocation Boom, Amy Keller, Florida Trend, https://www.floridatrend.com/article/32258/floridas-business-relocation-boom (September 28, 2021); Tech jobs, sun, and no income tax: experts explain why Florida is poised to keep growing even after the pandemic, Grace Dean, Business Insider, https://www.businessinsider.com/florida-growth-jobs-economy-population-new-york-pandemic-employment-miami-2021-4 (May 21, 2021).  Report Suggests Florida is the most business-friendly state, Caden DeLisa, The Capitolist, https://thecapitolist.com/report-suggests-florida-is-most-business-friendly-state-6-cities-in-top-20-nationwide-to-start-a-business/#:~:text=Florida%20is%20the%20most%20business,Tampa%20%E2%80%94%20in%20the%20top%20ten (April 27, 2022).  PwC’s Global Economic Crime and Fraud Survey 2022, https://www.pwc.com/gx/en/services/forensics/economic-crime-survey.html  One popular scheme is extortion to return data and other systems hijacked by cyber criminals.