10 Different Types of Business Fraud


The business of running a company has a particular risk. Business owners need to be aware of many kinds of frauds. We’ve put together 19 types of business frauds here.

1. Misappropriation of Company Assets

The theft of company assets is the most prevalent type of Fraud that businesses are likely to face. In this kind of Fraud, employees will take advantage of the position of their employer to profit from the company.

There are a variety of ways this might occur:

  • The criminal can steal money or time, goods or services, as well as intellectual property
  • They can also make false expense reports.
  • Purchase order fraud can happen when payment is made to fraudulent vendors
  • Credit cards issued by companies can be used to pay for personal costs
  • Checks can be forgeries
  • False sales can be used to earn commissions from those sales
  • Timesheets may be faked
  • The company vehicles can be used to use for personal purposes.

There are many ways employers can take to prevent the misuse or theft of assets belonging to the company. They should first check every employee carefully before deciding to hire them. Then, they can establish a whistleblowing policy and encourage an environment of awareness about Fraud within the company. Additionally, they can put in place security measures in the area, which restricts access to specific things according to the level of work in the company. Further, they should develop a plan of action if they find Fraud committed.

2. Corruption

The term”corruption” refers to several kinds associated with business fraud. What it means is that a person in charge of an organization has intentionally misused funds or engaged in dishonesty. It could include corruption, money laundering, accepting bribes and influencing public elections, conducting business transactions in conjunction with criminals, and performing transactions that were not disclosed.

If the corruption in an organization is revealed, the business’s customers are likely to lose faith in the company. The leadership would then need to divert valuable resources to determine the number of customers they lose, reducing the overall efficiency.

3. Financial Statement Fraud

There are a variety of ways that a business can identify Fraud in financial statements. General ledger verification must be carried out regularly. Reviewing transactions to identify abnormal amounts, changes, or patterns in financial reports is recommended. Accounting estimates must be analyzed for any errors that could cause mistakes caused by Fraud.

4. Payroll Fraud

Payroll fraud occurs through the payroll system of a business. There are a variety of kinds of this type of Fraud, including ghost employee schemes, advanced frauds, timesheet scams, and theft of paychecks.

Ghost employee schemes are the creation of fake employees. This usually happens by the employee who is in the payroll department. If they make a phony employee, the payment is sent to the fraudulent.

5. Invoice Fraud

Invoice fraud is when a business receives a false invoice or invoices from a vendor. The invoice is sent by an individual, typically an employee from the accounting or sales departments.

The fake invoice may be for goods or services that weren’t purchased. The scammer will set up an untrue supplier company or use an authentic company using altered information, for example, the bank account of a different company.

6. Identity Theft

When it comes to identity theft, a company could be either one of the victims or the culprit. This is why it’s a complicated type of Fraud.

It’s when a person obtains personal details of another for the sole purpose of using the information to extort money from the person. This could include using the individual’s social security number to open a brand new account, committing criminal acts under someone else’s identity, or using someone else’s debit or credit card to purchase.

Business owners can also commit identity theft. It is accomplished by stealing clients’ bank accounts and other personal data.

7. Tax Fraud

Tax fraud, also known as tax evasion, is the type of Fraud in which businesses falsify their profits and expenses submitted to the IRS in order to avoid paying all tax obligations. In another way, the business deliberately cheats on its tax return in order to avoid paying the entire tax obligation. Examples include declaring the personal expense as business, failing to report income, making false deductions, and claiming the wrong Social Security Number.

8. Insurance Fraud

The majority of companies provide workers indemnity benefits to their employees. Both the employee as well as the employer may use this insurance to be a fraudster.

Companies can prevent Fraud on insurance by following guidelines for the workers’ compensation system. It is also possible to be careful when filing workers’ compensation claimsand verifying every document submitted for authenticity.

9. Money Fraud

Fraud in the money industry is the use of fake bills to purchase. If companies do not examine frequently, the transactions remain unnoticed until it’s too late.

This type of Fraud could be avoided if cash handling staff are taught to identify whether the bills are genuine or not. The business could also consider investing in a counterfeit cash detector in the event that huge quantities of cash are handled regularly.

10. Return Fraud

Many retail stores offer a refund policy as well as exchanges of defective goods. Certain customers profit from the policies of these businesses by lying about purchasing, or returning stolen items and using stolen receipts or by using products that they have returned prior to the time when the return period has come expiring.

Brian Santiago

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