Verification and Know Your Business (KYB) processes that detect business identity theft help protect organizations and their legitimate clients.
Business identity theft is the fraudulent acquisition and misuse of a business’s identifying information. It involves stealing a company’s identity in much the same way as personal identity theft involves stealing an individual’s personal information.
A Trulioo global survey found that 79% of responding organizations have experienced business identity theft. The threat is driving urgency in the business verification market, with more than 75% of respondents indicating they will likely invest in such solutions within the next year.
Methods of Business Identity Theft
As with other fraud, new business identity attack vectors emerge constantly.
Perpetrators can target a business’s sensitive information, such as tax identification numbers, financial account details and trade secrets. The thieves then use the stolen information to impersonate the business online by creating fake documents or accounts that appear legitimate. Fraudsters also can create a fake entity using the stolen information.
The stolen business identity is often used to open lines of credit, apply for loans, make transactions or conduct other fraudulent financial activities. The frequency and value of business transactions can be substantially higher than personal accounts, so there’s a potential for larger payouts and a corresponding increase in risk.
The relatively open nature of business data, compared with personally identifiable information, makes it easier for fraudsters to access. The complexity of business identity information, with different standards and formats across regions, often makes false data difficult to uncover.
How to Prevent Business Identity Theft
Business identity theft can severely damage a company’s reputation. Fraudulent activities carried out using the business’s identity can be attributed to the company, leading to loss of trust and credibility.
The affected business can face legal and financial consequences, including liability for debt it didn’t authorize, legal battles to clear its name and expenses related to restoring its identity and reputation.
Businesses can mitigate identity theft by securing their data, regularly monitoring financial accounts, implementing strong verification processes and educating employees about potential threats.
If a business suspects or discovers identity theft, it should report the incident to law enforcement, credit bureaus and financial institutions. Quick action can mitigate the damage.
Business Verification Measures to Detect Fake Companies
Robust business verification at onboarding and key points after that help detect fraudulent companies, merchants and people. Layering different types of verification helps create a more comprehensive view of the business and catch discrepancies or fraud signals.
For example, business information is available on business registers. The questions are: Is the information accurate? Does it offer any indication of business validity, or is it just a listing for a fake company? Fraudsters often can create an illegitimate listing in official business registers.
Measures to verify and validate business information through multiple sources help corroborate the data and provide additional assurance. Enhanced due diligence processes include:
- Requesting official company documents from the registry to verify the information
- Identifying the ultimate beneficial owners (UBOs)
- Performing a KYC check on each UBO
- Checking names of businesses and UBOs against Anti-Money Laundering (AML) watchlists
The process of verifying a business entity used to be low-tech, costly and cumbersome, resulting in delays. But there now are ways to automate many processes and layer business and person verification in a single workflow.
An integrated approach that combines multiple verification capabilities, data sources, and risk and fraud signals enables quick, confident decision-making around business identity theft.
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