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• By Laura Bergstrand
• Nov 20, 2024
• 5 mins read

Preventing Business Identity Theft in Your Small Business

Small businesses are growing increasingly vulnerable to identity theft. Cybercriminals exploit business information to conduct unauthorized financial activities like making purchases, applying for credit, and accessing banking information. The Federal Trade Commission (FTC) reports that 80% of identity theft cases involve cybercriminals using stolen business details to open new accounts.  

This crime affects far too many small businesses. Sometimes you won’t even know until you see strange charges on your financial statements. But there are ways business owners can reduce their risk, preventing business identity theft before it happens. 

What is Business Identity Theft? 

Business identity theft occurs when criminals impersonate a business owner to commit fraud. This can involve using your Employer Identification Number (EIN), business credit profile, or other sensitive information to open credit lines, secure loans, or make unauthorized purchases.  

How Business Identity Theft Affects Small Businesses 

Identity theft can impact your company in countless ways, cutting into your operations and affecting your bottom line. According to the Association of Certified Fraud Examiners (ACFE), the median cost of a data breach is $200,000. These expenses do not include legal fees, customer notification costs, and investments in enhanced security measures.  

Beyond financial losses, identity theft can damage a company’s reputation. Customers may lose trust in a business that fails to protect their personal information, leading to decreased customer loyalty and potential loss of revenue.  

However, many businesses have successfully mitigated these risks by implementing robust security measures. The FTC emphasizes that businesses with strong cybersecurity protocols can detect and respond to potential threats more effectively, minimizing financial and operational impacts. 

How to Detect Signs of Business Identity Theft 

Recognizing the warning signs of business identity theft is crucial. Here are key indicators to watch out for: 

• Receiving bills for purchases you didn’t make or accounts you didn’t open could mean someone is using your business’s name to obtain credit.
  •Having unauthorized charges, transfers, and withdrawals on your bank account or credit card are also likely indicators of theft.
  • Missing mail; it could mean someone changed your mailing address.
  • Getting rejected for a credit card, loan, or mortgage as a result of debts you don’t recall. 

How to Take Preventive Measures Against Business Identity Theft 

Protecting your business from identity theft requires proactive steps. Implementing these measures can help keep your company’s sensitive information secure:  

Enhance Cybersecurity Practices 

• Install comprehensive security software: Use antivirus and anti-malware programs to guard against cyber threats.  

• Regularly update systems: Make sure all software and systems are up to date to ensure maximum protection.  

• Implement firewalls: Use firewalls to monitor and control network traffic. 2. Secure Sensitive Information 

• Limit access: Restrict sensitive information to authorized personnel only.  

• Use encryption: Encrypt data to protect it from unauthorized access.  

• Shred physical documents: Properly dispose of documents containing sensitive information. 

Monitor Financial Accounts 

• Regularly review accounts: Consistently review bank and credit card statements for any unusual transactions.  

• Set up alerts: Use account alerts to get immediate notifications of suspicious activity.   

Educate Employees 

• Conduct training sessions: Teach employees about phishing, scams, and safe online practices.  

• Establish security policies: Create and enforce clear cybersecurity policies for all staff members.  

Implementing effective preventive measures may require investments in security tools, training, or system upgrades. Working capital funding can provide the financial flexibility needed to cover these investments, ensuring your business has the resources to maintain and strengthen its defenses without disrupting other operations. With financial support, you can prioritize the measures necessary to keep your company secure against identity theft.

H2: What to Do if Identity Theft Impacts Your Business 

Despite your best efforts to protect your business from identity theft, no system is foolproof. When identity theft occurs, taking immediate action is critical to restoring financial stability and rebuilding consumer trust. The Better Business Bureau (BBB) recommends taking these essential steps:  

1. File a police report: Begin by filing a police report and retaining a copy. This document serves as proof for your credit card company and other financial institutions, forming the foundation of your case for dispute and protection. 
2. Verify your mail: Make sure your mail isn’t being sent to an unauthorized address. Contact your local post office to confirm that your business mail is still being delivered to the correct location.  
3. Close compromised credit accounts: If your business credit card accounts are compromised, close them immediately and open new accounts.  
4. Notify your bank: Report unauthorized transfers or withdrawals and change your account PINs.  
5. Contact credit bureaus: Reach out to the major credit bureaus and request a fraud alert on your business profile. 
6. Monitor your credit reports: After reporting the identity theft, regularly review your business credit report for several months to ensure all fraudulent activity has been addressed and no new suspicious activity occurred.  
7. Communicate transparently with customers: If customer information has been compromised, it is a legal requirement to inform them promptly. Although this may be a difficult conversation, transparency builds trust.  

Stay One Step Ahead of Identity Thieves 

Preventing business identity theft requires strategic planning and a commitment to taking proactive measures. While no business is immune to threats, having a clear action plan and the right resources in place can make all the difference. Remember, being prepared today can save your business tomorrow. Stay informed, stay secure, and stay ahead.