No wallet, no problem (Image: ThinkStock)

Here are four safety tips from FDIC Consumer News that can greatly reduce the chances of becoming a victim in the event your wallet is lost or stolen.

•Limit the amount of confidential information in your wallet. Only carry the identification, checks, credit cards or debit/ATM cards you really need. The rest, including bank account numbers, personal identification numbers (PINs), passwords, and most importantly, Social Security cards, are best kept elsewhere in a safe place. Likewise, don’t pre-print your Social Security number or driver’s license number on your checks, because either one could help a thief apply for a loan, credit card or bank account in your name.

•Keep good backup information about your bank and credit card accounts. You’ll want account numbers and phone numbers that can be used to report your losses or request new cards. “Some people make copies of the front and back of all the cards or important notes in their wallet to help jog their memory,” says FDIC Regional Ombudsman Janet Kincaid.

•Review your credit card bills and your checking account statements as soon as they arrive. Make sure that no fraudulent activity is taking place. Periodically request your credit reports. Look for signs that someone may have obtained loans or tried to commit other fraud in your name. By federal law, you are entitled to one free copy of your credit report every 12 months from each of the three nationwide credit bureaus—Equifax, Experian and TransUnion. Go to http://www.AnnualCreditReport.com or call toll-free 1-877-322-8228 to order your free credit reports.

•If you’ve already been victimized, take steps to limit your liability. Immediately call your bank (to report a lost debit/ATM card) and your credit card companies. And if you spot an unauthorized charge on your credit card, you must follow up on any phone calls to your card issuer with a letter disputing the transaction. “Under the Fair Credit Billing Act, you must dispute unauthorized charges appearing on your credit card statement in writing within 60 days after it was sent to you,” notes Joni Creamean, Chief of the FDIC’s Consumer Response Center. “The letter also must be sent to the bank’s designated address for billing inquiries, not to where you’d mail your payments.”

Source: FDIC Consumer News

Many small businesses get defrauded from the inside. Here's how to protect yourself.

Deliberate fraud costs companies an estimated 5% – 6% of revenues each year. And small businesses are often victims of such unethical behavior—particularly during lean times where employees serve in multiple roles and a smaller staff means less oversight. According to Joseph W. Koletar, a former FBI agent who now serves as a private sector fraud investigator, there are simple steps a small business owner can take to reduce his or her likelihood of falling victim to an employee looking to defraud the company.

Koletar, author of Rethinking Risk: How Companies Sabotage Themselves and What They Must do Differently (AMACOM, $29.95), points out that most perpetrators of corporate fraud do so not out of necessity but greed. He says the typical fraud perpetrator is between 45 and 55 years old, more than 90% of them have no criminal record, and 65% have college degrees. Another interesting factoid: Most have been with their company 10 to 15 years. “They’re not career criminals,” he says. “They’re your average, middle-class people who live in nice suburbs, love their kids and coach soccer.”

So what’s a small businesses owner to do? Here are a few things Koletar says entrepreneurs should be aware of:

Resources are available. Among them is the Association of Certified Fraud Examiners. Founded by a former FBI agent in 1989, the ACFE offers training, certification, conferences, and they publish a number of books geared toward small businesses. Another resource is the National White Collar Crime Center, which provides training, investigative support and research to agencies and entities involved in the prevention, investigation and prosecution of economic and high-tech crime.

Know the division of responsibilities. If an employee or group of employees has access to a company’s finances, make sure that there’s always a good degree of oversight over them. Koletar says there was a case where an employee added a fictitious staffer to the company’s payroll, maxed out that imaginary person’s deductibles, and collected a refund from the IRS!

View bank statements. Each month, have your company bank statement sent to your house, not your office. “That way you can look at it and say ‘Gee, we sent a check out on July 22 and I never heard of this company,’” says Koletar. “If one person is in charge of everything, they can play games.”

Use the exit interview. “The exit interview is normally very perfunctory—hand in your employee card, sign some paper work, and walk out the door,” Koletar says. But employers should take the opportunity to ask the departing employee some basic questions about his or her colleagues, such as whether they noticed any disturbing behavior about their co-workers, recommends Koletar. “You might not get anything, but you may learn that Bob in accounting has a gambling problem and may be playing games with company money.”

Smith-Valentine

Since the beginning of the recession not only has fraudulent activity increased, but the amount of money lost to fraud has increased as well.

U.S. businesses lose 7% of annual revenue, equaling $994 billion, to fraud, but small businesses are even more vulnerable, according to a report from the Association of Certified Fraud Examiners.

Small businesses suffered both a greater percentage of frauds (38%) and a higher median loss ($200,000) compared with companies that have 100 to 10,000 employees that only suffered losses between $116,000 and $176,000, according to the report.

Between the recession and loss due to fraud, small business owners are under even more pressure to stay profitable and stay in business. Lawyer, accountant, and identity theft expert Sonya Smith-Valentine lays out eight steps that small business owners should take to keep their assets safe from in-house thieves.

Keep important items locked up. Make employees who have access to sensitive information lock office doors and file cabinets at the end of the workday. Keep the mailbox locked and limit the keys to the mailbox. Make sure all computers have automatic password protection and instruct users to log off when they step away from their computers. Put passwords on your bank accounts so that only specific people can order new checks.

Check employee references. At a minimum, run a civil and criminal background check on employees, and as your business grows, hire bonded bookkeepers. Even get background information from building management about cleaning crews that have access to your offices.

If an employee has anything to do with money, check their credit report to learn about their debts. “If their credit is really jacked up and they are really hard-pressed for money, they might not be the person you want,” says Smith-Valentine.

Sign your own checks. If one person is doing all the bookkeeping they might make payouts to companies that you haven’t done business with. They may set up a dummy billing system to make it seem like you received a bill for services and they are just paying the bill. If you sign checks yourself, you are more inclined to pay attention to where the money is going, and employees are also less likely to embezzle, says Smith-Valentine. If the owner isn’t available to sign the checks, then require the signatures of two different employees on checks.
Separate the responsibilities of accounts payable employees. Make sure the person who is paying the bills (i.e. signing checks) is different from the person who is logging the information into the computer. When you split the two job responsibilities it becomes harder to manipulate the data, says Smith-Valentine. Also, don’t allow the data entry employee access to the mail. This will reduce the data entry clerk’s ability to steal a check and cover it up.

Perform random audits of vendors and clients. Let your staff know that once every six months you will choose a business that your company does business with and randomly audit it. Randomly choose checks from your bank statements, find out who the checks were made out to, and then audit that company. Consider hiring an outside accounting firm to do this; it will put the employees on notice that there are people other than you watching them.

Encourage employee watchdogs. Implement a process for employees to anonymously report abuse and fraud. Also let them know that they could be rewarded if information they provide leads to the arrest of an offender.

Purchase employee dishonesty insurance coverage. Taking time to detect fraud and clean up the aftermath is time you could be using to run your business. You can purchase inexpensive insurance plans to help defer some of the costs that occur as a result of fraud or embezzlement.

Encourage employees to take vacation time. A lot of small business owners are happy when their employees work as much as possible. But the embezzling employee will never take off time. They come in early, stay late, and they always want to discourage you from looking up information on your own, says Smith-Valentine. “If something strange is going on, it is probably going to pop up while they are gone.”

Resources:

Fraud Awareness Week

Small Business Fraud Prevention Manual Anti Fraud Resources

Keep Swinging: An Entrepreneur’s Story of Overcoming Adversity and Achieving Small Business Success

United States Secret Service Field Office