The Small Business Swindle: How Fraud Affects Independent Businesses

How Fraud Affects Independent Businesses SMALL BUSINESS Every year, businesses large and small sustain millions in The losses due to fraud. Small businesses are particularly at risk. The Association Of Certified Fraud Examiners suggests that small businesses are more vulnerable to SWINDLE fraud because they typically have fewer anti-fraud measures than larger organizations. Here, we take a look at how four types of fraud impact small businesses around the country. DATA FRAUD Perpetrators of data fraud target small businesses to acquire sensitive information such as customer credit card data. E Incidence Vulnerability 4% 46% 54% 1,000,000 Only 4% of small businesses report being a victim of data fraud. However, that amounts to roughly one million merchants across the country who have experienced this type of fraud. Of independent merchants who electronically store cardholder data, only 46% take steps to protect that data, leaving the other 54% of businesses vulnerable to data fraud, How Small Businesses Protect Themselves 76% 46% SOFTWARE UPDATE//II Encrypt transmission of cardholder data across open, public networks Use and regularly update antivirus software 76% 43% Restrict physical access to cardholder data 64% Track and monitor all access to network resources and cardholder data Develop and maintain secure systems and applications EMBEZZLEMENT Perpetrators of embezzlement deliberately target their employers for personal enrichment. Where Fraud Occurs Incidence According to the Association Of Certified Fraud Examiners, small businesses are particularly good targets for embezzlement because they typically More than 80% of embezzlement is committed by individuals in one of have fewer anti-fraud controls than six departments. • Accounting • Customer Service • Executive/Upper large organizations. Vulnerability Management • Operations • Purchasing • Sales 31% of all embezzlement is pUSINESS 31% committed against small businesses. Cost of Embezzlement 5% $155,000 18 months Portion of annual revenue that Median loss to a small business Median duration of fraud incident the typical organization loses to fraud. due to an embezzlement case before being detected How Small Businesses Protect Themselves 52% 16% External audit of financial statements Fraud training for managers/executives 41% 15% CODE CONDUCT Established employee code of conduct Employee hotline for tips [Management| Certification 33% 13% Management certification on financial statements Fraud training for employees 31% 11% POP AUDITS Management review of financials and employees Surprise internal audits 19% 3% Employee support programs Rewards for whistleblowers $$ ONLINE BANKING FRAUD target small businesses' bank accounts. Perpetrators of online banking fraud { Incidence 56% of small businesses reported experiencing banking fraud in the last 12 months 61% of those were victimized more than once 75% of small businesses reported they've experienced online fraud MONTH 61% 75% 56% S Money Lost For small businesses experiencing bank fraud... 31% did not receive any compensation 37% received some reimbursement for unrecovered funds from their bank for funds BANK Banks of all sizes are vulnerable. Small Size Doesn't Matter businesses banking at smaller institutions are just as likely to experience fraud as those banking and at mid-size or large institutions. How Small Businesses Protect Themselves MONTH 78% 26% Account reconciliation at the end of the month Dedicated computer for online banking 55% 21% Positive pay or filtered positive pay Daily review & approval of all outgoing transactions 49% Prevent FRAUD 16% More than one person controlling accounts Fraud prevention education for employees CHECK FRAUD Perpetrators manipulate checks to defraud businesses of account funds. Incidence CHECK FRAUD 45% 30% Reported Online Fraud 100 employees 45% of fraud cases that businesses large According to the 2011 Business Banking Trust Study, 75% of those victimized by fraud cited online fraud. More than 1/3 of The check fraud that small businesses experience can be closely related to both employee embezzlement and online banking fraud. and small experience are check fraud.* 30% of fraud cases committed in the workplace occurred in businesses with less than 100 employees -- with one of the most common fraud cases being check fraud. these cases resulted from check fraud. A Vulnerability EXHIBIT For small businesses who fall victim to check fraud, banking resolution isn't guaranteed. Responsibility to pay often hinges on whether a business can prove they took the right preventive measures. |How Small Businesses Protect Themselves Many of the things businesses do to protect themselves from online banking fraud can also protect them against check fraud. Beyond the suggestions offered above, here are other ways companies can ensure they don't fall victim to check fraud. -Ensure adequate security features and carefully select a check vendor. For example, by using high security checks, a small business can demonstrate it's taken -Thoroughly read bank contracts and disclosure agreements to understand liability for fraud losses. care to protect its security. -Establish safe office practices like -Examine new checks when they A separating accounting duties and controlling reconciliation. arrive and keep boxes sealed until needed. -Destroy unused checks from closed accounts immediately and thoroughly. -Maintain tight check security by keeping all unused checks, cancelled checks, reorder forms, and signature stamps under lock and key. -Set up positive pay service to prevent unauthorized checks from clearing the account. "Smal Business Fraud Custom Study among Smal Business Owners Conducted for SunTrust Banks/National Smal Business AssociationEdelman, October 17, 2007. Sources: Association Of Certified Fraud Examiners, Guardian Analytics, National Retail Federation, U.S. Small Business Administration QuickBooks Online intuit. How Fraud Affects Independent Businesses SMALL BUSINESS Every year, businesses large and small sustain millions in The losses due to fraud. Small businesses are particularly at risk. The Association Of Certified Fraud Examiners suggests that small businesses are more vulnerable to SWINDLE fraud because they typically have fewer anti-fraud measures than larger organizations. Here, we take a look at how four types of fraud impact small businesses around the country. DATA FRAUD Perpetrators of data fraud target small businesses to acquire sensitive information such as customer credit card data. E Incidence Vulnerability 4% 46% 54% 1,000,000 Only 4% of small businesses report being a victim of data fraud. However, that amounts to roughly one million merchants across the country who have experienced this type of fraud. Of independent merchants who electronically store cardholder data, only 46% take steps to protect that data, leaving the other 54% of businesses vulnerable to data fraud, How Small Businesses Protect Themselves 76% 46% SOFTWARE UPDATE//II Encrypt transmission of cardholder data across open, public networks Use and regularly update antivirus software 76% 43% Restrict physical access to cardholder data 64% Track and monitor all access to network resources and cardholder data Develop and maintain secure systems and applications EMBEZZLEMENT Perpetrators of embezzlement deliberately target their employers for personal enrichment. Where Fraud Occurs Incidence According to the Association Of Certified Fraud Examiners, small businesses are particularly good targets for embezzlement because they typically More than 80% of embezzlement is committed by individuals in one of have fewer anti-fraud controls than six departments. • Accounting • Customer Service • Executive/Upper large organizations. Vulnerability Management • Operations • Purchasing • Sales 31% of all embezzlement is pUSINESS 31% committed against small businesses. Cost of Embezzlement 5% $155,000 18 months Portion of annual revenue that Median loss to a small business Median duration of fraud incident the typical organization loses to fraud. due to an embezzlement case before being detected How Small Businesses Protect Themselves 52% 16% External audit of financial statements Fraud training for managers/executives 41% 15% CODE CONDUCT Established employee code of conduct Employee hotline for tips [Management| Certification 33% 13% Management certification on financial statements Fraud training for employees 31% 11% РOP AUDITS Management review of financials and employees Surprise internal audits 19% 3% Employee support programs Rewards for whistleblowers $$ ONLINE BANKING FRAUD target small businesses' bank accounts. Perpetrators of online banking fraud { Incidence 56% of small businesses reported experiencing banking fraud in the last 12 months 61% of those were victimized more than once 75% of small businesses reported they've experienced online fraud MONTH 61% 75% 56% S Money Lost For small businesses experiencing bank fraud... 31% did not receive any compensation 37% received some reimbursement for unrecovered funds from their bank for funds BANK Banks of all sizes are vulnerable. Small Size Doesn't Matter businesses banking at smaller institutions are just as likely to experience fraud as those banking and at mid-size or large institutions. How Small Businesses Protect Themselves MONTH 78% 26% Account reconciliation at the end of the month Dedicated computer for online banking 55% 21% Positive pay or filtered positive pay Daily review & approval of all outgoing transactions 49% Prevent FRAUD 16% More than one person controlling accounts Fraud prevention education for employees CHECK FRAUD Perpetrators manipulate checks to defraud businesses of account funds. Incidence CHECK FRAUD 45% 30% Reported Online Fraud 100 employees 45% of fraud cases that businesses large According to the 2011 Business Banking Trust Study, 75% of those victimized by fraud cited online fraud. More than 1/3 of The check fraud that small businesses experience can be closely related to both employee embezzlement and online banking fraud. and small experience are check fraud.* 30% of fraud cases committed in the workplace occurred in businesses with less than 100 employees -- with one of the most common fraud cases being check fraud. these cases resulted from check fraud. A Vulnerability EXHIBIT For small businesses who fall victim to check fraud, banking resolution isn't guaranteed. Responsibility to pay often hinges on whether a business can prove they took the right preventive measures. |How Small Businesses Protect Themselves Many of the things businesses do to protect themselves from online banking fraud can also protect them against check fraud. Beyond the suggestions offered above, here are other ways companies can ensure they don't fall victim to check fraud. -Ensure adequate security features and carefully select a check vendor. For example, by using high security checks, a small business can demonstrate it's taken -Thoroughly read bank contracts and disclosure agreements to understand liability for fraud losses. care to protect its security. -Establish safe office practices like -Examine new checks when they A separating accounting duties and controlling reconciliation. arrive and keep boxes sealed until needed. -Destroy unused checks from closed accounts immediately and thoroughly. -Maintain tight check security by keeping all unused checks, cancelled checks, reorder forms, and signature stamps under lock and key. -Set up positive pay service to prevent unauthorized checks from clearing the account. "Smal Business Fraud Custom Study among Smal Business Owners Conducted for SunTrust Banks/National Smal Business AssociationEdelman, October 17, 2007. Sources: Association Of Certified Fraud Examiners, Guardian Analytics, National Retail Federation, U.S. Small Business Administration QuickBooks Online intuit. How Fraud Affects Independent Businesses SMALL BUSINESS Every year, businesses large and small sustain millions in The losses due to fraud. Small businesses are particularly at risk. The Association Of Certified Fraud Examiners suggests that small businesses are more vulnerable to SWINDLE fraud because they typically have fewer anti-fraud measures than larger organizations. Here, we take a look at how four types of fraud impact small businesses around the country. DATA FRAUD Perpetrators of data fraud target small businesses to acquire sensitive information such as customer credit card data. E Incidence Vulnerability 4% 46% 54% 1,000,000 Only 4% of small businesses report being a victim of data fraud. However, that amounts to roughly one million merchants across the country who have experienced this type of fraud. Of independent merchants who electronically store cardholder data, only 46% take steps to protect that data, leaving the other 54% of businesses vulnerable to data fraud, How Small Businesses Protect Themselves 76% 46% SOFTWARE UPDATE//II Encrypt transmission of cardholder data across open, public networks Use and regularly update antivirus software 76% 43% Restrict physical access to cardholder data 64% Track and monitor all access to network resources and cardholder data Develop and maintain secure systems and applications EMBEZZLEMENT Perpetrators of embezzlement deliberately target their employers for personal enrichment. Where Fraud Occurs Incidence According to the Association Of Certified Fraud Examiners, small businesses are particularly good targets for embezzlement because they typically More than 80% of embezzlement is committed by individuals in one of have fewer anti-fraud controls than six departments. • Accounting • Customer Service • Executive/Upper large organizations. Vulnerability Management • Operations • Purchasing • Sales 31% of all embezzlement is pUSINESS 31% committed against small businesses. Cost of Embezzlement 5% $155,000 18 months Portion of annual revenue that Median loss to a small business Median duration of fraud incident the typical organization loses to fraud. due to an embezzlement case before being detected How Small Businesses Protect Themselves 52% 16% External audit of financial statements Fraud training for managers/executives 41% 15% CODE CONDUCT Established employee code of conduct Employee hotline for tips [Management| Certification 33% 13% Management certification on financial statements Fraud training for employees 31% 11% РOP AUDITS Management review of financials and employees Surprise internal audits 19% 3% Employee support programs Rewards for whistleblowers $$ ONLINE BANKING FRAUD target small businesses' bank accounts. Perpetrators of online banking fraud { Incidence 56% of small businesses reported experiencing banking fraud in the last 12 months 61% of those were victimized more than once 75% of small businesses reported they've experienced online fraud MONTH 61% 75% 56% S Money Lost For small businesses experiencing bank fraud... 31% did not receive any compensation 37% received some reimbursement for unrecovered funds from their bank for funds BANK Banks of all sizes are vulnerable. Small Size Doesn't Matter businesses banking at smaller institutions are just as likely to experience fraud as those banking and at mid-size or large institutions. How Small Businesses Protect Themselves MONTH 78% 26% Account reconciliation at the end of the month Dedicated computer for online banking 55% 21% Positive pay or filtered positive pay Daily review & approval of all outgoing transactions 49% Prevent FRAUD 16% More than one person controlling accounts Fraud prevention education for employees CHECK FRAUD Perpetrators manipulate checks to defraud businesses of account funds. Incidence CHECK FRAUD 45% 30% Reported Online Fraud 100 employees 45% of fraud cases that businesses large According to the 2011 Business Banking Trust Study, 75% of those victimized by fraud cited online fraud. More than 1/3 of The check fraud that small businesses experience can be closely related to both employee embezzlement and online banking fraud. and small experience are check fraud.* 30% of fraud cases committed in the workplace occurred in businesses with less than 100 employees -- with one of the most common fraud cases being check fraud. these cases resulted from check fraud. A Vulnerability EXHIBIT For small businesses who fall victim to check fraud, banking resolution isn't guaranteed. Responsibility to pay often hinges on whether a business can prove they took the right preventive measures. |How Small Businesses Protect Themselves Many of the things businesses do to protect themselves from online banking fraud can also protect them against check fraud. Beyond the suggestions offered above, here are other ways companies can ensure they don't fall victim to check fraud. -Ensure adequate security features and carefully select a check vendor. For example, by using high security checks, a small business can demonstrate it's taken -Thoroughly read bank contracts and disclosure agreements to understand liability for fraud losses. care to protect its security. -Establish safe office practices like -Examine new checks when they A separating accounting duties and controlling reconciliation. arrive and keep boxes sealed until needed. -Destroy unused checks from closed accounts immediately and thoroughly. -Maintain tight check security by keeping all unused checks, cancelled checks, reorder forms, and signature stamps under lock and key. -Set up positive pay service to prevent unauthorized checks from clearing the account. "Smal Business Fraud Custom Study among Smal Business Owners Conducted for SunTrust Banks/National Smal Business AssociationEdelman, October 17, 2007. Sources: Association Of Certified Fraud Examiners, Guardian Analytics, National Retail Federation, U.S. Small Business Administration QuickBooks Online intuit. How Fraud Affects Independent Businesses SMALL BUSINESS Every year, businesses large and small sustain millions in The losses due to fraud. Small businesses are particularly at risk. The Association Of Certified Fraud Examiners suggests that small businesses are more vulnerable to SWINDLE fraud because they typically have fewer anti-fraud measures than larger organizations. Here, we take a look at how four types of fraud impact small businesses around the country. DATA FRAUD Perpetrators of data fraud target small businesses to acquire sensitive information such as customer credit card data. E Incidence Vulnerability 4% 46% 54% 1,000,000 Only 4% of small businesses report being a victim of data fraud. However, that amounts to roughly one million merchants across the country who have experienced this type of fraud. Of independent merchants who electronically store cardholder data, only 46% take steps to protect that data, leaving the other 54% of businesses vulnerable to data fraud, How Small Businesses Protect Themselves 76% 46% SOFTWARE UPDATE//II Encrypt transmission of cardholder data across open, public networks Use and regularly update antivirus software 76% 43% Restrict physical access to cardholder data 64% Track and monitor all access to network resources and cardholder data Develop and maintain secure systems and applications EMBEZZLEMENT Perpetrators of embezzlement deliberately target their employers for personal enrichment. Where Fraud Occurs Incidence According to the Association Of Certified Fraud Examiners, small businesses are particularly good targets for embezzlement because they typically More than 80% of embezzlement is committed by individuals in one of have fewer anti-fraud controls than six departments. • Accounting • Customer Service • Executive/Upper large organizations. Vulnerability Management • Operations • Purchasing • Sales 31% of all embezzlement is pUSINESS 31% committed against small businesses. Cost of Embezzlement 5% $155,000 18 months Portion of annual revenue that Median loss to a small business Median duration of fraud incident the typical organization loses to fraud. due to an embezzlement case before being detected How Small Businesses Protect Themselves 52% 16% External audit of financial statements Fraud training for managers/executives 41% 15% CODE CONDUCT Established employee code of conduct Employee hotline for tips [Management| Certification 33% 13% Management certification on financial statements Fraud training for employees 31% 11% РOP AUDITS Management review of financials and employees Surprise internal audits 19% 3% Employee support programs Rewards for whistleblowers $$ ONLINE BANKING FRAUD target small businesses' bank accounts. Perpetrators of online banking fraud { Incidence 56% of small businesses reported experiencing banking fraud in the last 12 months 61% of those were victimized more than once 75% of small businesses reported they've experienced online fraud MONTH 61% 75% 56% S Money Lost For small businesses experiencing bank fraud... 31% did not receive any compensation 37% received some reimbursement for unrecovered funds from their bank for funds BANK Banks of all sizes are vulnerable. Small Size Doesn't Matter businesses banking at smaller institutions are just as likely to experience fraud as those banking and at mid-size or large institutions. How Small Businesses Protect Themselves MONTH 78% 26% Account reconciliation at the end of the month Dedicated computer for online banking 55% 21% Positive pay or filtered positive pay Daily review & approval of all outgoing transactions 49% Prevent FRAUD 16% More than one person controlling accounts Fraud prevention education for employees CHECK FRAUD Perpetrators manipulate checks to defraud businesses of account funds. Incidence CHECK FRAUD 45% 30% Reported Online Fraud 100 employees 45% of fraud cases that businesses large According to the 2011 Business Banking Trust Study, 75% of those victimized by fraud cited online fraud. More than 1/3 of The check fraud that small businesses experience can be closely related to both employee embezzlement and online banking fraud. and small experience are check fraud.* 30% of fraud cases committed in the workplace occurred in businesses with less than 100 employees -- with one of the most common fraud cases being check fraud. these cases resulted from check fraud. A Vulnerability EXHIBIT For small businesses who fall victim to check fraud, banking resolution isn't guaranteed. Responsibility to pay often hinges on whether a business can prove they took the right preventive measures. |How Small Businesses Protect Themselves Many of the things businesses do to protect themselves from online banking fraud can also protect them against check fraud. Beyond the suggestions offered above, here are other ways companies can ensure they don't fall victim to check fraud. -Ensure adequate security features and carefully select a check vendor. For example, by using high security checks, a small business can demonstrate it's taken -Thoroughly read bank contracts and disclosure agreements to understand liability for fraud losses. care to protect its security. -Establish safe office practices like -Examine new checks when they A separating accounting duties and controlling reconciliation. arrive and keep boxes sealed until needed. -Destroy unused checks from closed accounts immediately and thoroughly. -Maintain tight check security by keeping all unused checks, cancelled checks, reorder forms, and signature stamps under lock and key. -Set up positive pay service to prevent unauthorized checks from clearing the account. "Smal Business Fraud Custom Study among Smal Business Owners Conducted for SunTrust Banks/National Smal Business AssociationEdelman, October 17, 2007. Sources: Association Of Certified Fraud Examiners, Guardian Analytics, National Retail Federation, U.S. Small Business Administration QuickBooks Online intuit. How Fraud Affects Independent Businesses SMALL BUSINESS Every year, businesses large and small sustain millions in The losses due to fraud. Small businesses are particularly at risk. The Association Of Certified Fraud Examiners suggests that small businesses are more vulnerable to SWINDLE fraud because they typically have fewer anti-fraud measures than larger organizations. Here, we take a look at how four types of fraud impact small businesses around the country. DATA FRAUD Perpetrators of data fraud target small businesses to acquire sensitive information such as customer credit card data. E Incidence Vulnerability 4% 46% 54% 1,000,000 Only 4% of small businesses report being a victim of data fraud. However, that amounts to roughly one million merchants across the country who have experienced this type of fraud. Of independent merchants who electronically store cardholder data, only 46% take steps to protect that data, leaving the other 54% of businesses vulnerable to data fraud, How Small Businesses Protect Themselves 76% 46% SOFTWARE UPDATE//II Encrypt transmission of cardholder data across open, public networks Use and regularly update antivirus software 76% 43% Restrict physical access to cardholder data 64% Track and monitor all access to network resources and cardholder data Develop and maintain secure systems and applications EMBEZZLEMENT Perpetrators of embezzlement deliberately target their employers for personal enrichment. Where Fraud Occurs Incidence According to the Association Of Certified Fraud Examiners, small businesses are particularly good targets for embezzlement because they typically More than 80% of embezzlement is committed by individuals in one of have fewer anti-fraud controls than six departments. • Accounting • Customer Service • Executive/Upper large organizations. Vulnerability Management • Operations • Purchasing • Sales 31% of all embezzlement is pUSINESS 31% committed against small businesses. Cost of Embezzlement 5% $155,000 18 months Portion of annual revenue that Median loss to a small business Median duration of fraud incident the typical organization loses to fraud. due to an embezzlement case before being detected How Small Businesses Protect Themselves 52% 16% External audit of financial statements Fraud training for managers/executives 41% 15% CODE CONDUCT Established employee code of conduct Employee hotline for tips [Management| Certification 33% 13% Management certification on financial statements Fraud training for employees 31% 11% РOP AUDITS Management review of financials and employees Surprise internal audits 19% 3% Employee support programs Rewards for whistleblowers $$ ONLINE BANKING FRAUD target small businesses' bank accounts. Perpetrators of online banking fraud { Incidence 56% of small businesses reported experiencing banking fraud in the last 12 months 61% of those were victimized more than once 75% of small businesses reported they've experienced online fraud MONTH 61% 75% 56% S Money Lost For small businesses experiencing bank fraud... 31% did not receive any compensation 37% received some reimbursement for unrecovered funds from their bank for funds BANK Banks of all sizes are vulnerable. Small Size Doesn't Matter businesses banking at smaller institutions are just as likely to experience fraud as those banking and at mid-size or large institutions. How Small Businesses Protect Themselves MONTH 78% 26% Account reconciliation at the end of the month Dedicated computer for online banking 55% 21% Positive pay or filtered positive pay Daily review & approval of all outgoing transactions 49% Prevent FRAUD 16% More than one person controlling accounts Fraud prevention education for employees CHECK FRAUD Perpetrators manipulate checks to defraud businesses of account funds. Incidence CHECK FRAUD 45% 30% Reported Online Fraud 100 employees 45% of fraud cases that businesses large According to the 2011 Business Banking Trust Study, 75% of those victimized by fraud cited online fraud. More than 1/3 of The check fraud that small businesses experience can be closely related to both employee embezzlement and online banking fraud. and small experience are check fraud.* 30% of fraud cases committed in the workplace occurred in businesses with less than 100 employees -- with one of the most common fraud cases being check fraud. these cases resulted from check fraud. A Vulnerability EXHIBIT For small businesses who fall victim to check fraud, banking resolution isn't guaranteed. Responsibility to pay often hinges on whether a business can prove they took the right preventive measures. |How Small Businesses Protect Themselves Many of the things businesses do to protect themselves from online banking fraud can also protect them against check fraud. Beyond the suggestions offered above, here are other ways companies can ensure they don't fall victim to check fraud. -Ensure adequate security features and carefully select a check vendor. For example, by using high security checks, a small business can demonstrate it's taken -Thoroughly read bank contracts and disclosure agreements to understand liability for fraud losses. care to protect its security. -Establish safe office practices like -Examine new checks when they A separating accounting duties and controlling reconciliation. arrive and keep boxes sealed until needed. -Destroy unused checks from closed accounts immediately and thoroughly. -Maintain tight check security by keeping all unused checks, cancelled checks, reorder forms, and signature stamps under lock and key. -Set up positive pay service to prevent unauthorized checks from clearing the account. "Smal Business Fraud Custom Study among Smal Business Owners Conducted for SunTrust Banks/National Smal Business AssociationEdelman, October 17, 2007. Sources: Association Of Certified Fraud Examiners, Guardian Analytics, National Retail Federation, U.S. Small Business Administration QuickBooks Online intuit. How Fraud Affects Independent Businesses SMALL BUSINESS Every year, businesses large and small sustain millions in The losses due to fraud. Small businesses are particularly at risk. The Association Of Certified Fraud Examiners suggests that small businesses are more vulnerable to SWINDLE fraud because they typically have fewer anti-fraud measures than larger organizations. Here, we take a look at how four types of fraud impact small businesses around the country. DATA FRAUD Perpetrators of data fraud target small businesses to acquire sensitive information such as customer credit card data. E Incidence Vulnerability 4% 46% 54% 1,000,000 Only 4% of small businesses report being a victim of data fraud. However, that amounts to roughly one million merchants across the country who have experienced this type of fraud. Of independent merchants who electronically store cardholder data, only 46% take steps to protect that data, leaving the other 54% of businesses vulnerable to data fraud, How Small Businesses Protect Themselves 76% 46% SOFTWARE UPDATE//II Encrypt transmission of cardholder data across open, public networks Use and regularly update antivirus software 76% 43% Restrict physical access to cardholder data 64% Track and monitor all access to network resources and cardholder data Develop and maintain secure systems and applications EMBEZZLEMENT Perpetrators of embezzlement deliberately target their employers for personal enrichment. Where Fraud Occurs Incidence According to the Association Of Certified Fraud Examiners, small businesses are particularly good targets for embezzlement because they typically More than 80% of embezzlement is committed by individuals in one of have fewer anti-fraud controls than six departments. • Accounting • Customer Service • Executive/Upper large organizations. Vulnerability Management • Operations • Purchasing • Sales 31% of all embezzlement is pUSINESS 31% committed against small businesses. Cost of Embezzlement 5% $155,000 18 months Portion of annual revenue that Median loss to a small business Median duration of fraud incident the typical organization loses to fraud. due to an embezzlement case before being detected How Small Businesses Protect Themselves 52% 16% External audit of financial statements Fraud training for managers/executives 41% 15% CODE CONDUCT Established employee code of conduct Employee hotline for tips [Management| Certification 33% 13% Management certification on financial statements Fraud training for employees 31% 11% РOP AUDITS Management review of financials and employees Surprise internal audits 19% 3% Employee support programs Rewards for whistleblowers $$ ONLINE BANKING FRAUD target small businesses' bank accounts. Perpetrators of online banking fraud { Incidence 56% of small businesses reported experiencing banking fraud in the last 12 months 61% of those were victimized more than once 75% of small businesses reported they've experienced online fraud MONTH 61% 75% 56% S Money Lost For small businesses experiencing bank fraud... 31% did not receive any compensation 37% received some reimbursement for unrecovered funds from their bank for funds BANK Banks of all sizes are vulnerable. Small Size Doesn't Matter businesses banking at smaller institutions are just as likely to experience fraud as those banking and at mid-size or large institutions. How Small Businesses Protect Themselves MONTH 78% 26% Account reconciliation at the end of the month Dedicated computer for online banking 55% 21% Positive pay or filtered positive pay Daily review & approval of all outgoing transactions 49% Prevent FRAUD 16% More than one person controlling accounts Fraud prevention education for employees CHECK FRAUD Perpetrators manipulate checks to defraud businesses of account funds. Incidence CHECK FRAUD 45% 30% Reported Online Fraud 100 employees 45% of fraud cases that businesses large According to the 2011 Business Banking Trust Study, 75% of those victimized by fraud cited online fraud. More than 1/3 of The check fraud that small businesses experience can be closely related to both employee embezzlement and online banking fraud. and small experience are check fraud.* 30% of fraud cases committed in the workplace occurred in businesses with less than 100 employees -- with one of the most common fraud cases being check fraud. these cases resulted from check fraud. A Vulnerability EXHIBIT For small businesses who fall victim to check fraud, banking resolution isn't guaranteed. Responsibility to pay often hinges on whether a business can prove they took the right preventive measures. |How Small Businesses Protect Themselves Many of the things businesses do to protect themselves from online banking fraud can also protect them against check fraud. Beyond the suggestions offered above, here are other ways companies can ensure they don't fall victim to check fraud. -Ensure adequate security features and carefully select a check vendor. For example, by using high security checks, a small business can demonstrate it's taken -Thoroughly read bank contracts and disclosure agreements to understand liability for fraud losses. care to protect its security. -Establish safe office practices like -Examine new checks when they A separating accounting duties and controlling reconciliation. arrive and keep boxes sealed until needed. -Destroy unused checks from closed accounts immediately and thoroughly. -Maintain tight check security by keeping all unused checks, cancelled checks, reorder forms, and signature stamps under lock and key. -Set up positive pay service to prevent unauthorized checks from clearing the account. "Smal Business Fraud Custom Study among Smal Business Owners Conducted for SunTrust Banks/National Smal Business AssociationEdelman, October 17, 2007. Sources: Association Of Certified Fraud Examiners, Guardian Analytics, National Retail Federation, U.S. Small Business Administration QuickBooks Online intuit. How Fraud Affects Independent Businesses SMALL BUSINESS Every year, businesses large and small sustain millions in The losses due to fraud. Small businesses are particularly at risk. The Association Of Certified Fraud Examiners suggests that small businesses are more vulnerable to SWINDLE fraud because they typically have fewer anti-fraud measures than larger organizations. Here, we take a look at how four types of fraud impact small businesses around the country. DATA FRAUD Perpetrators of data fraud target small businesses to acquire sensitive information such as customer credit card data. E Incidence Vulnerability 4% 46% 54% 1,000,000 Only 4% of small businesses report being a victim of data fraud. However, that amounts to roughly one million merchants across the country who have experienced this type of fraud. Of independent merchants who electronically store cardholder data, only 46% take steps to protect that data, leaving the other 54% of businesses vulnerable to data fraud, How Small Businesses Protect Themselves 76% 46% SOFTWARE UPDATE//II Encrypt transmission of cardholder data across open, public networks Use and regularly update antivirus software 76% 43% Restrict physical access to cardholder data 64% Track and monitor all access to network resources and cardholder data Develop and maintain secure systems and applications EMBEZZLEMENT Perpetrators of embezzlement deliberately target their employers for personal enrichment. Where Fraud Occurs Incidence According to the Association Of Certified Fraud Examiners, small businesses are particularly good targets for embezzlement because they typically More than 80% of embezzlement is committed by individuals in one of have fewer anti-fraud controls than six departments. • Accounting • Customer Service • Executive/Upper large organizations. Vulnerability Management • Operations • Purchasing • Sales 31% of all embezzlement is pUSINESS 31% committed against small businesses. Cost of Embezzlement 5% $155,000 18 months Portion of annual revenue that Median loss to a small business Median duration of fraud incident the typical organization loses to fraud. due to an embezzlement case before being detected How Small Businesses Protect Themselves 52% 16% External audit of financial statements Fraud training for managers/executives 41% 15% CODE CONDUCT Established employee code of conduct Employee hotline for tips [Management| Certification 33% 13% Management certification on financial statements Fraud training for employees 31% 11% РOP AUDITS Management review of financials and employees Surprise internal audits 19% 3% Employee support programs Rewards for whistleblowers $$ ONLINE BANKING FRAUD target small businesses' bank accounts. Perpetrators of online banking fraud { Incidence 56% of small businesses reported experiencing banking fraud in the last 12 months 61% of those were victimized more than once 75% of small businesses reported they've experienced online fraud MONTH 61% 75% 56% S Money Lost For small businesses experiencing bank fraud... 31% did not receive any compensation 37% received some reimbursement for unrecovered funds from their bank for funds BANK Banks of all sizes are vulnerable. Small Size Doesn't Matter businesses banking at smaller institutions are just as likely to experience fraud as those banking and at mid-size or large institutions. How Small Businesses Protect Themselves MONTH 78% 26% Account reconciliation at the end of the month Dedicated computer for online banking 55% 21% Positive pay or filtered positive pay Daily review & approval of all outgoing transactions 49% Prevent FRAUD 16% More than one person controlling accounts Fraud prevention education for employees CHECK FRAUD Perpetrators manipulate checks to defraud businesses of account funds. Incidence CHECK FRAUD 45% 30% Reported Online Fraud 100 employees 45% of fraud cases that businesses large According to the 2011 Business Banking Trust Study, 75% of those victimized by fraud cited online fraud. More than 1/3 of The check fraud that small businesses experience can be closely related to both employee embezzlement and online banking fraud. and small experience are check fraud.* 30% of fraud cases committed in the workplace occurred in businesses with less than 100 employees -- with one of the most common fraud cases being check fraud. these cases resulted from check fraud. A Vulnerability EXHIBIT For small businesses who fall victim to check fraud, banking resolution isn't guaranteed. Responsibility to pay often hinges on whether a business can prove they took the right preventive measures. |How Small Businesses Protect Themselves Many of the things businesses do to protect themselves from online banking fraud can also protect them against check fraud. Beyond the suggestions offered above, here are other ways companies can ensure they don't fall victim to check fraud. -Ensure adequate security features and carefully select a check vendor. For example, by using high security checks, a small business can demonstrate it's taken -Thoroughly read bank contracts and disclosure agreements to understand liability for fraud losses. care to protect its security. -Establish safe office practices like -Examine new checks when they A separating accounting duties and controlling reconciliation. arrive and keep boxes sealed until needed. -Destroy unused checks from closed accounts immediately and thoroughly. -Maintain tight check security by keeping all unused checks, cancelled checks, reorder forms, and signature stamps under lock and key. -Set up positive pay service to prevent unauthorized checks from clearing the account. "Smal Business Fraud Custom Study among Smal Business Owners Conducted for SunTrust Banks/National Smal Business AssociationEdelman, October 17, 2007. Sources: Association Of Certified Fraud Examiners, Guardian Analytics, National Retail Federation, U.S. Small Business Administration QuickBooks Online intuit.