6 Common Types of Frauds in Business You Should Look Out For

6 Common Types of Frauds in Business You Should Look Out For

Just like any other formal organization, businesses experience fraudulent activities. They bleed the business some hard-earned money, which reduces profit margins. These activities range from in house collusion to external corporate fraud. Depending on the nature of the business, fraud can come in different forms. Financial institutions battle with cyber-crime while other corporate entities are hit with business scams. Irrespective of the magnitude, you need to hire fraud lawyers to help navigate these losses.

Common Corporate Frauds to Watch Out

1. Identity Theft

Identity theft comes in two ways, brand theft or idea theft. Brand theft is the use of a brand without permission from the owner and gets business deals. Entrepreneurs spend years developing their brand to reputable standards. These standards set the bar in which clients associate it with quality and efficiency. Still in brand theft, if another company falsely claims to have done a big company project as a testimony of their ability, it is identity theft.

Idea theft is also a crime, although technical. You may have a golden idea which you might share with another person. If the person implements it, that is identity theft. However, for your assertion to stand, you should have certified ownership of the idea through patent. If someone or a company uses the brand for personal gain, that is identity theft.

2. Ponzi Schemes

These are investment programs that lure unsuspecting people into with promises of high returns. The secondary investors commit both time and money into the programs, only to lose their money in an unexplained fashion. It is one of the most common financial fraud, with people who do not undertake due diligence falling prey.

3. Embezzlement and Misappropriation of Funds

It is a deliberate scheme by people within and outside the organization to siphon funds from a company. They inflate the prices of goods and services above the market prizes and divert the excess for personal use. Although it passes all accounting huddles, people in the procurement and accounting department are usually privy to the scheme. Their reward is a share of the loot for personal gain.

It is classified as a business scam and attracts a heavy punishment using the Public Finance Management Act. Fraud lawyers have a legal way of handling such excess with culpable persons charged with economic and financial theft.

4. Bribery and Corruption

It is the most common vice among all corporate frauds and involves exchanging monetary favors to override processes or procedures. It can be initiated by the customer service agent or the customer. The customer service agent can deliberately prolong a process or issuance and ask for a bribe to fast track the process. For the customer, he or she might lack the required essentials but bulldoze their way by issuing kickbacks.

In some countries, corruption is a capital offense and attracts maximum punishment to both parties. Such activities delay service delivery to deserving citizens.

5. Payroll Fraud

It occasionally occurs in large organizations such as international companies or governments where the number of employees is high. Human resources officers create ghost workers and generate payrolls for them. If audit systems are weak, these fraudulent activities can go on unnoticed for years. The result is fleecing the organization of money which can otherwise be used to improve service delivery.

6. Bouncing Cheques

It occurs when companies or people issue payments in form of cheques with the explicit knowledge that the account does not have sufficient funds. The payee can take legal action on such an entity for failure to pay for goods or services rendered. Financial institutions have an internal audit unit with fraud lawyers to handle it.


Business relationships involve the exchange of goods and services with money. Any other sideshows that prolong or cheat the process can be classified as business scams. Be aware of such schemes and take legal action where necessary.