Home Business Insights & Advice The best ways of protecting your business from loan fraud

The best ways of protecting your business from loan fraud

by John Saunders
20th Dec 21 4:18 pm

There is hardly anything that we can’t do easily over the internet, from booking a doctor appointment, organising the manicure to shopping and even applying for a loan. While we are using digital technology and the internet to improve our lives, cyber criminals are doing exactly the same. The development of digital technology, digital transformation of various businesses and our ever growing presence on the internet has allowed them to evolve their fraudulent activities to cause even more damage. For example, while you might use the ease of the internet to conduct your financial activities, fraudsters can use it to gain access to your personal information and use it to request a new credit card, apply for a loan or even pretend to be a loan company and exploit your trustworthiness. Fraud attempts like a payday loan scam can cause significant issues for the business as it can ruin their credit score and cause financial damage, but it also poses a great reputational risk as customers could lose their trust in that business.

Luckily, what goes around, comes around. While the development of technology has introduced these risks into our lives, it has also introduced the ways we can deal with them and prevent them from affecting our lives. Now you can protect your business from experiencing damages caused by payday loan fraud by being proactive and developing a successful prevention for payday loan scams.

How does loan fraud work?

It is actually quite simple. Loan fraud is a type of identity theft fraud that occurs when a fraudster uses your personal information to apply for a loan. Loan agencies are asking for surprisingly little personal data during the application process since they are loaning relatively small amounts which gives the chance to fraudsters to get a loan just by using  your Social Security number or your personal banking information. Even the governments discovered how resourceful fraudsters can be when they introduced Covid 19 relief programs, such as the Pay check Protection Program (PPP) and the Economic Injury Disaster Loans (EIDL) in the United States. It has been estimated that more than 5% of all transactions were fraudulent which comes to tens of billions of dollars lost.

How can you protect your business from loan fraud?

The biggest issue with loan fraud is that it can be hard to recognise it is happening until it is too late to do anything but to deal with the aftermath. This is why it is critical you are proactive regarding the safety of your business and that you take all the necessary steps to prevent loan fraud before it even happens rather than dealing with it after it has already caused the damage.

Protect your network. By using the latest firewalls and anti-virus software’s, and keeping them regularly updated you can protect your business from fraudsters and cyber criminals gaining access to your network and your confidential details they could use to conduct loan fraud. You should also implement cybersecurity tools such as device fingerprinting or email lookup tools for the additional level of protection as it can help you prevent fraudulent activities before it can cause any damage.

Raise cyber awareness. Fraudsters can easily trick your unsuspecting employees into providing them with sensitive information about your business. If you raise their cyber awareness, they will know what they need to keep an eye on, and how to reach in case they are faced with a fraud attempt.

Conduct regular financial checks. You should regularly perform internal financial review so you can notice any discrepancies the moment they happen. This might not stop the loan fraud before it happens but it will help you react before it causes significant damage.

Protect the access to your sensitive data. Passwords are key to all of your business data, which is why you need to be vigilant in ensuring you and your employees have good password hygiene. Using complex and unique passwords combined with a multi factor verification can prevent cybercriminals from accessing your sensitive information and using them for fraudulent activities. Don’t forget to protect your hard copy documents, as they can also be used against you. All of the documents that contain sensitive information should be either shredded or stored securely. 

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