Internet fraud is growing and will continue to grow as more business operations move online. So far in 2023, Australians have lost over $21 million in internet-related scams, with over 4000 reports made. In 2020 the financial loss was about $26 million for the whole year, showing how much internet attacks have risen. The bad news is criminals do not discriminate. They are not afraid to go after individuals or companies.
What is internet fraud?
Internet fraud refers to any form of deception, manipulation, or abuse of the internet and digital technologies. It can be perpetrated by individuals or organised groups who exploit security weaknesses and vulnerabilities to manipulate, steal or cause harm to businesses and their customers. Internet fraud can take several different forms and the main motivator behind these attacks is usually financial gain.
Examples of internet fraud
There are numerous types of internet fraud that businesses should be aware of. The most common examples:
Phishing scams: This type of fraud involves criminals sending emails, text messages or phone calls that appear to come from legitimate companies, often impersonating well-known brands. The goal of these scams is to trick recipients into revealing sensitive information or downloading malicious software.
Hacking and data breaches: Through hacking, attackers target a business’s computer systems, networks or websites to gain unauthorised access or control over sensitive information, customer data or even hold the system for ransom.
Business identity theft: This occurs when an individual or group poses as a legitimate business by using the organisation’s name, logo or domain to deceive customers, partners, or even the company’s own employees. If they gain enough information, the criminal may contact the employees pretending to be the CEO or their manager.
Technical support scams: The scammer contacts a potential victim, claiming to be from a reputable company that provides technical support. They then attempt to convince the customer that their computer has a problem and offer to “fix” it for a fee, often installing malware in the process. These types of criminals usually ask individuals for access to control their screens.
The above-listed examples are not exhaustive, but they provide an overview of the many forms of internet fraud that businesses need to be prepared to address.
The impact of internet fraud on businesses
Internet fraud can have severe consequences for businesses, both in terms of financial losses and damage to their reputation. Here, we discuss the key ways in which internet fraud can impact a business:
1. Financial losses
One of the most visible impacts of internet fraud on businesses is financial loss. Cybercriminals often target businesses to steal sensitive data, such as payment and financial information. The theft of such data can result in significant losses, including the loss of revenue, legal costs, and damages to the goodwill of the business. In 2022, the FBI revealed that there was more than $10 billion lost to online fraud. This actually reported as a peak number, the highest in the past few years, and it is expected to grow this year.
2. Reputational damage
Businesses that fall victim to internet fraud are also likely to suffer reputational damage. When customers realise that their personal information has been compromised, they may lose trust in the business and its ability to keep their data safe. Trust is a crucial element for any business to succeed and a stained reputation can result in the loss of customers, decreased sales and in some cases, even bankruptcy. The cost of repairing a damaged reputation can be substantial, involving public relations campaigns or legal costs to deal with the aftermath of an incident.
3, Legal ramifications
Internet fraud can lead to legal ramifications for businesses. Companies that do not take sufficient measures to protect their customer data can face heavy fines or penalties from regulatory bodies. The General Data Protection Regulation (GDPR) in the EU and Privacy Act 1988 in Australia require companies to notify their customers and authorities of data breaches that may affect the privacy or security of their personal data. Failure to do so can result in legal trouble, which can be imposed on top of the financial losses mentioned earlier.
4. Loss of intellectual property
Businesses invest heavily in developing intellectual property such as trade secrets and patents to maintain a competitive edge. Internet fraud can be an avenue to access such information, leading to its theft or loss. Intellectual property theft can result in a loss of revenue, lack of market differentiation or a detrimental impact on the company’s future growth prospects. People who are after intellectual property may sell product designs to competitors or rip-off companies to create a fake version of the original product.
5. Increased cost of security
Protecting businesses from internet fraud can be a costly exercise. The cybersecurity industry has grown in response to the rise of cyber threats and businesses are expected to invest in strong measures to protect themselves from these threats. Companies need to allocate resources to train employees in precautionary measures, invest in security software, conduct regular vulnerability assessments and hire experts to conduct penetration testing. These measures all add to the cost of operating a business and, in many cases, may seem difficult to justify but could be larger if a data breach occurs and expenses are targeted at fixes.
How to prevent internet fraud
1. Implement security measures
Expensive or not, security measures are necessary for preventing internet fraud and protecting the business and its assets. This may involve installing firewalls, antivirus software and encryption protocols. Firewalls act as a defensive barrier by blocking malicious files or software from entering the system. Antivirus software protects the system from malicious files and viruses that can be used to steal confidential information. Encryption protocols ensure that sensitive data is transmitted securely and cannot be intercepted and stolen by hackers.
Email filtering is also useful as it can scan through the emails employees receive and remove those that are detected to be junk or a scam. Businesses should ensure that they keep their software up-to-date by regularly updating their devices’ security patches. Patches are released by software sellers (E.g. Microsoft) to address vulnerabilities in their software, reducing the risk of cyber-attacks.
2. Provide employee training
Training is used to address many issues within a business. This is because it provides awareness but it also educates staff. Business owners should provide regular training and use mock scenarios to educate employees on the different ways that cybercriminals can access business information. Phishing scams, for example, are a popular way that scammers use to deceive employees into providing sensitive data. During training, businesses can use phishing email simulations to demonstrate how to identify and prevent such scams. Businesses should use real looking emails held by the filter and show them to the employees so they can get a clear idea of what a scam can look like.
Employees should be made aware of the relevant security policies and procedures governing the use of company-owned devices such as laptops, tablets and smartphones. For example, employees should be trained to use strong passwords, not to share their passwords with anyone else and to avoid using public Wi-Fi.
3. Monitor financial transactions
Businesses should continuously monitor their financial transactions for any signs of suspicious activity. Unfortunately, often a fraud is only detected during an audit since businesses do not monitor company credit cards regularly. This leads to greater financial loss as the company did not realise the unauthorised transactions sooner. Banks and other financial institutions often offer fraud protection services as part of their package. These services monitor transactions to identify any potential fraudulent activities and alert businesses if such activities are detected.
Businesses should also set up automatic fraud alerts on their bank accounts so that they are alerted in real-time if any suspicious activity is detected. In addition, companies can opt to use payment methods that offer multi-factor authentication for online transactions. Multi-factor authentication requires the use of a secondary layer of security, such as a one-time code from the bank, before a transaction is authorised.
4. Secure network access
Businesses should adopt a secure network access policy, limiting the access of sensitive data to only authorised staff. One way to limit access is by implementing role-based access control (RBAC). RBAC ensures that users can only access the data and applications that are essential for their roles. It helps reduce the risk of data exposure, as employees can only access sensitive data that is relevant to their job and not to others.
Moreover, getting a virtual private network (VPN) is another way businesses can secure their network access. VPNs create a secure network connection that makes users anonymous and hides content from third parties. VPNs are especially useful in the case that an employee uses public Wi-Fi by accident.
Internet fraud can be hard to eliminate but there are many strategies that can minimise its impact and chance of occurring. As investigating internet fraud can be time-consuming, our customers use Polonious to speed up the process. We can integrate with detection software, and can ensure that audits are carried out quickly so our customers can focus on their core business tasks and help them benefit from lower administrative costs. If you are looking for a reliable and confidential system that can help you detect internet fraud early, reach out!
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