10 Warning Signs Its Fraud

10 Warning Signs Its Fraud


Ohio, United States — Protecting your business against fraud is essential to scaling your company and preventing losses. Statistics show businesses will lose up to 5% of their revenue to fraud. Also, small business fraud is at 28% compared to larger organizations which range between 22 to 26% fraud occurrences.

The most effective way to prevent your business from internal and external fraud is to look for signs that indicate fraud. By doing this, you can take quick, proactive steps to keep them in check.

This article discusses the most prominent warning signs of internal and external fraud for businesses.

Let’s dive right in.

How to detect fraud in your company


Some specific practices and tools can help you identify and prevent fraud from miles away. Let’s find out below:

  1. Fraud analytics

Fraud analytics involves adopting data insights to detect fraud. It entails examining suspicious activity or adopting big data strategies and machine learning to identify and stop fraud.

Analytics are crucial to detecting and preventing fraud because they supply cumbersome insights to analyze manually. Fraud analytics allows you to discover fraudsters’ interest areas and adopt strategies to avoid such occurrences.

You can do this by adopting several data analytics techniques for fraud prevention, including unsupervised learning, clustering algorithms, etc. To learn more about data analytics and fraud prevention, check out SEONs article on analytics in fraud prevention.

  1. Use an address verification service

An Address Verification Service (AVS) is an automated fraud prevention tool to mitigate fraudulent practices in the organization. It examines the billing address a customer provides to the address from the bank.

It also identifies if both addresses are the same. If there’s a mismatch, the account and order are rejected and restricted until there’s evidence that the issuer is an authorized user. An address verification software makes it easier for organizations to detect fraud in real-time, prevents illegitimate access, and protects the company’s system from compromise.

  1. Perform regular audits

Set up a dynamic internal audit team to perform anti-fraud controls. They establish policies and ethics employees must adhere to mitigate fraudulent practices and maintain compliance. Auditors can also perform surprise audits to evaluate payroll, inventory, cash and investment, expense tracking, etc.

Regular audits conduct risk assessments to identify and prioritize areas that require attention. It also detects gaps and reports observations and recommendations to improve compliance and fraud prevention practices.

10 signs that indicate fraud


How do you know fraudulent activities are taking place in your organization? Here are the telltale signs to watch out for.

  1. Inaccurate accounts

Inaccurate accounts can indicate early signs of fraud. If a project exceeds the usual budget or there are unusual cash transactions, you should check if any fraudulent activity occurred.

You can confirm your suspicions by asking the following questions:

  • What were the additional expenses made?
  • What’s causing any delay in accounts?
  • Have similar payments been sent to different customers on the same day?
  • Do the vendors you’ve transacted with come from questionable companies?
  • Are there any suspicious cash movements?

Conduct regular audits if you suspect any suspicious transaction or financial activity. Did sales increase recently, and was the expected revenue generated? If not, figure out if it’s due to inflation or other reasons. Conducting regular audits will help you identify these signs and take quick steps to fix them.

  1. Bank statement modification

Bank statement modifications can be early indicators of internal fraud. So, don’t hesitate to audit the accounting department if you notice any irregularities in the bank statements.

Autonomy in the accounting department can promote fraud because there isn’t anyone to review the other person’s activity. So, segregate accounting duties so that it’s not the same person receiving and reconciling accounts.

Additionally, ensure you have a bank statement copy before sending it to the accounting department. This way, you can examine if the bank statements with the account team are similar to what you have.

  1. Fake invoices


Fake invoices can be signs of external and internal fraudulent activities. A fraudster can send fake invoices to your company, requesting payment. They have an idea of what your company does and the regular supplies you purchase, so they imitate the order. These fraudsters may state that the supply payment is overdue or threaten that late payment will affect credit card ratings.

Additionally, a fraudster in your company can create false invoices and bills to pay. They may link the payments to their bank accounts to receive the funds.

It’s easy to be a victim of these scams without proper scrutiny. So, to prevent this, review external and internal transactions intentionally. Implement internal controls, and categorize transactions for adequate monitoring. This way, you can detect false invoices and prevent fraud.

  1. Government agency imposter scams

Fraudsters impersonate government institutions to scam companies. They can pose as a government body, threaten to suspend a business’s license, impose sanctions and fines if you don’t renew a contract, etc. This type of scam can go on for years without notice by companies, making them pay non-existent grant fees, contract fees, etc.

So, if you suspect fraud through demands from unverified bodies, conduct a thorough background check to ensure the organization is legit.

  1. Incremental increase in budgets

An increase in budget and expenses may result from inflation, change, or additional resources, which could be because of fraudulent activity. Employees may increase a project’s budget, purchase orders, and cost of supplies to steal from the company.

Therefore, if you notice an incremental increase in budget or expenses, check in with the accounting team to confirm the claims are valid. You can also introduce basic inventory practices and checkout procedures to track the number of goods coming in and how much they cost. Doing this will keep you in the loop on your inventory to notice early signs of fraud.

  1. Multiple payments

Multiple payments are internal pointers of early fraud in your organization. The accounting department may duplicate payments to a vendor or service provider. They may also send duplicate payments to non-existent organizations, causing the employers to make multiple payments.

So, scrutinize every payment made to detect occurrences like this. If you discover similar charges across the transactions system, observe the accounting department to confirm multiple payments are not made. If they are, ensure they go to the appropriate parties and not false companies.

  1. Persistent complaints

Frequent complaints from employees and customers about specific processes, transaction types, or employees may point to fraud. So, if you receive frequent complaints about staff or a transaction method, don’t dismiss them.

Examine the situations to be sure the complaints aren’t indicators of any suspicious activity. For example, while frequent errors in orders and invoices could be mistakes, they could also be because a staff member is trying to alter the accounts. In such cases, you may assign a superior to monitor their activity. You may also change their roles if necessary.

Also, if you realize some specific processes will promote fraud within the organization, consider implementing new strategies to replace existing ones.

  1. Data breaches

Data breaches are prominent indicators of fraud in your organization. Hackers can steal your organization’s sensitive data if a trusted company member gives them access.

They harness your company’s information by exploiting weak passwords, software and hardware vulnerabilities. They may also instigate malware attacks through spam, phishing emails, etc.

The most prominent reason hackers breach an organization’s information is to execute fraudulent activities. Therefore, take effective damage control measures when your system is compromised.

Conduct an audit to confirm if none of the records have been altered, monitor all transactions, and install antivirus and firewalls. Finally, limit employees’ access to the company’s sensitive information, and introduce two-factor authentication.

  1. Excessive number of adjusting entries


Frequently adjusted entries could be signs of external and internal fraud. A fraudster may try to cover up their activities through several alterations. An employee can also make multiple corrections in an entry for suspicious reasons.

So, if you notice excessive adjustments in documents submitted by an employee or customer, ensure they are for legitimate reasons.

You can control extreme adjustments by requesting each adjustment be attached to a corresponding note explaining the reasons for the corrections. Doing this will prove that adjustments aren’t cases of fraud.

  1. Cheque scams

A cheque scam is a common fraud many businesses fall victim to. A fraudster may overpay with a cheque and demand that you transfer the excess funds to a third party. However, when the bank discovers it’s a lousy cheque, the scammer is long gone, and you are left to pay the bank.

Consider electronic bank payments, including wireless, direct deposit payment, email fund transfers, etc., to cheques. Also, examine monthly bank statements to identify suspicious cheque activity and notify your bank immediately to avoid cheque scams.


Fraud detection plays a massive role in preventing scams. Identifying early signs of fraud will enable organizations to take proactive measures against fraudulent activities and protect their business. Watch out for the signs discussed in this article to detect fraud in your organization early.

Author Bio:
Lydia Iseh is a writer with years of experience in writing SEO content that provides value to the reader. As someone who believes in the power of SEO to transform businesses, she enjoys being part of the process that helps websites rank high on search engines.

Media contact:

Name: Hendrick James

Email: pantheonukorg@gmail.com