Tax season looks different for many this year, as the effects of COVID-19 have impacted many business' finances. Although COVID-19 has altered tax deadlines it has not altered tax criminals’ motives. In fact, these fraudsters kept busy this year using tactics like phishing to manipulate a person into handing over sensitive information by pretending to be a trusted source. It is estimated that tax fraud costs businesses $27 billion per year, the stakes are high as these criminals deploy different tools in their toolkit in an effort to score big. In order to anticipate these criminals next move, businesses must educate themselves on the potential threats they face. Once informed, a solid mitigation strategy to defend against financial fraud is the right path to take.
A Costly Outcome
As a business, it would be very disheartening to wake up one day and find the IRS reaching about a W-2 that was not filed inside your organization. This is exactly what happened to the owner of Captain D’s seafood restaurant in Atlanta. A police report indicated that more than 100 fake W-2 forms totaling $4 million dollars were filed to collect nonexistent salary returns. The chain was left owing $800,000 dollars in payroll taxes. Unfortunately, this is one of many businesses who experienced loss on this scale, but this risk can be greatly minimized.
Familiar Methods Updated for the Digital Age
When criminals engage in fraudulent activities, they typically don’t fix what isn’t broken. The digital age allows criminals to leverage the current events of the time and new technologies, but they typically don’t deviate from some core attack methods. The reason is because the old methods work, and not many people tend to defend against them adequately. Robbing a bank is still robbing a bank if it is done physically or digitally, but a digital landscape makes this process much more efficient and sophisticated.
In a quarter of a year, organized cyber criminals stole $25 million from small to mid-sized businesses in e-banking heists. Compare that to the $9.5 million stolen physically from banks in that same time period. New technologies have made criminals' jobs much easier. This also gives businesses an edge, because they can anticipate predictable patterns.
Defining the Arsenal
There is a wide array of scams to watch out for when it comes to business tax fraud. The most common that criminals tend to use are phishing scams, payroll scams, ransomware, and EIN theft. An EIN or an Employer Identification Number is a unique business identifier. Tax criminals know that if they can get their hands on this information, they can easily attempt to impersonate the identity of the business entity of their choosing. Employees can also use the EIN to abuse company credit lines and commit internal theft.
Additionally, cybercriminals like to commit tax fraud in a more direct way using ransomware. When an attack is successful, a business will find computers and data on their network locked. Most times, this data is sensitive and causes great harm if released. Cybercriminals use fear of this to demand payment in order to unlock your data. Federal officials advise against paying these ransoms, and payment does not guarantee a release of the system, so a solid back-up plan is necessary to defend against cyber threats.
Fortify Your Frontline Defense
Managing the digital landscape is an ongoing challenge. Critical Ops evaluates your organization's technological architecture to improve your security and put you on the offense against cyber threats.
Let's grab a quick virtual coffee together to chat about your concerns and discover a path forward.