Business Fraud Explained


What is business fraud?

Business fraud, also known as corporate fraud, is a broad term to describe fraudulent activities carried out by an individual or a company for the benefit of the perpetrator. Charity fraud, non-delivery and non-payment fraud, Internet auction fraud fall into the business fraud category. Furthermore, in most cases, anything illegal a company does is called business fraud. For example, falsifying a company’s financial accounting records to make the company more attractive to investors would be business fraud. As would be purposely disguising flaws of a product a company is developing.

Examples of business fraud

  • Charity fraud.

This kind of business fraud involves criminals pretending to be from charities and convincing victims to make a donation. Scammers approach potential victims in various ways, including emails and in-person. Victims may also come across fake charities while browsing social media, forums, comment sections, etc. Scammers pretend to be either from known charities such as the Red Cross or create new fake ones. Charity scammers become particularly active after a recent disaster such as a forest fire, hurricane, earthquake, flood, etc. They create fake campaigns to encourage people to donate to non-existent charities to supposedly help victims of such disasters. There has also been a significant increase in charity fraud campaigns since the global coronavirus pandemic began.

  • Non-delivery scams.

Non-delivery scams involve people paying for some merchandise but not receiving it. Scammers create fake online stores, sell fake merchandise on social media and platforms like Amazon or eBay. People pay for fake items, sometimes large sums of money, but do not receive anything.

  • Non-payment scams.

Non-payment scams involve sellers shipping merchandise but not receiving a payment.

  • Internet auction fraud.

Internet auction fraud is essentially selling non-existent, stolen, or fake items on auction sites. Deliberately concealing any defects when auctioning an item would also be considered Internet auction fraud.

How to avoid becoming a victim of business fraud

  • Buy goods from known online stores.

When purchasing goods, particularly if they’re expensive, it’s recommended to use online stores you are already familiar with or at least ones you know to be legitimate. There are many fake online stores that sell non-existent items so be very cautious when shopping online.

  • Always research charities before donating.

If you encounter a charity online and wish to make a donation, look into the charity first. There are a lot of fake charities, especially because of the global COVID-19 pandemic. Keep in mind that legitimate charities will never email people who have never donated to them before. If you receive an email that invites you to donate to some charity (even if it’s a charity you know) and provides a link, do not click on it. After making sure the charity is legitimate, manually go to the charity’s official website and make the donation. You should avoid making in-person donations if you’re approached by someone. If it’s a cause you wish to donate to, write down the details of the charity, and make a donation via its official website after making sure the charity is legitimate.

  • When using a new store, always do research before purchasing something.

If you want to buy something from an online store you’re using for the first time, do extensive research before making a purchase. If you’ve never heard of the store, check the website’s information. If it’s a website that was created very recently, it’s possible you’re dealing with a scam. Check the store’s social media presence, and read reviews. If the store looks even remotely suspicious, avoid using it as the possibility of not receiving the goods is high.

  • Do research before placing a bet on an online auction.

It’s very important that you first do research before placing a bet on an online auction to make sure the seller is not carrying out a scam. Make sure you completely understand how the auction works, and what your and the seller’s obligations are. Read the seller’s reviews but be skeptical of only 5-star reviews with no or only positive comments. If possible, pay with a credit card and make payments only via the auction’s platform. If you are contacted by the seller to buy the item without placing a bid, do not make payments directly to them using services like Western Union or Moneygram.

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