Avoid Scams and Schemes
You probably know how to protect yourself from consumer scams, but did you know your business can be a prime target for scams and schemes as well? Bad actors are constantly creating new, sophisticated ways to trick busy and distracted business owners into paying for unnecessary services or compromising their business’s identity.
Fortunately, many of the steps you already take to protect yourself are useful in protecting your business, too. Below are several simple ways for you to avoid common scams and schemes targeting your business or non-profit.
When you receive a notice in the mail or by email that asks you to pay money for a product or service, be sure to read the fine print. Often, the fine print on such a notice will clearly state that the service is “elective,” that the business sending you the notice is not affiliated with the official agency it is imitating, and that you can obtain the service or product for a lower fee or for free from the official source.
Never assume a notice or website is legitimate without fully reading the fine print. Often, the fine print will prevent you from recovering any funds you submitted in haste, especially if you actually receive the product or service you paid for, even if that product or service was not necessary or otherwise available at a lower cost or no cost at all.
If your business receives a notice in the mail or by email that looks to be from a government agency, credit card company, financial institution or other reputable organization, it pays to take a second look. Be sure to read the entire notice carefully and analyze the sender’s name and address. If you have any doubts, contact the organization by calling the number on their official website. Never use the phone number or email address on the notice.
When navigating the web, it’s important to carefully review the URL of the website you are visiting. Remember, if you are trying to find information or submit a form to a government agency (such as the Secretary of State, RI Division of Taxation, or IRS), the URL should always end in “.gov.”
While new scams and schemes are created with startling regularity, many known ploys continue to be popular with fraudsters. Several of these common scams and schemes are listed below, and you can find more information on the Federal Trade Commission’s Scams and Your Small Business website.
Obtain a Certificate of Good Standing
What to look for: Newly registered businesses and non-profits receive an official-looking form in the mail demanding that the entity pay between $80-100 for a Certificate of Good Standing from the RI Department of State.
What you should know: While the RI Department of State does issue Certificates of Good Standing, this document is not a required part of the business registration or maintenance process. If your business or non-profit ever needs a Certificate of Good Standing, the fee is $7 for non-profits and $22 for all other entities.
Pay for an EIN
What to look for: Newly registered businesses and non-profits looking to obtain an EIN may be deceived in two ways. First, you may receive an official-looking form in the mail offering to obtain an EIN on your business’s behalf for an exorbitant fee. Second, when searching the internet you are likely to encounter several sponsored websites that charge hefty fees for this otherwise free service.
What you should know: All entities registered with the RI Department of State are required to obtain an EIN from the IRS to identify the entity for tax and employment purposes. Obtaining an EIN is 100% FREE directly from the IRS at IRS.gov.
Third-Party Beneficial Ownership Information Report Filer
What to look for: Your business or non-profit may receive an official-looking form in the mail demanding that you pay $150 or more to file the required beneficial ownership information report with FinCEN. You may also encounter third-party websites offering this same service for a hefty fee.
What you should know: Beginning January 1, 2024, most businesses registered with the RI Department of State are required to submit a separate report to a federal agency, the Financial Crimes Enforcement Network (FinCEN), detailing important and private information about the business and the people who own or substantially control it. Filing this report is 100% FREE and should only be submitted directly to FinCEN at FinCen.gov/boi.
Purchase Workplace Compliance Posters
What to look for: Your business will likely receive official-looking notices and forms by mail demanding a fee for required federal and state labor posters that must be posted in your place of business.
What you should know: State and Federal law requires employers to post specific employment-related information in a place of work or to provide that same information electronically to remote employers. These posters are available for FREE on the RI Department of Labor and Training website.
Satisfy a Fake Invoice
What to look for: Fraudsters may create and send tricky, fake invoices to your business that look like you ordered products or services. The goal is to trick you or the person who handles your bills to assume the invoice is real and submit payment. Your business might also receive a call where the individual asks you to confirm an order, verify an address, or offer a free catalog or product sample. If you agree to or confirm any of these questions, unwanted merchandise will arrive at your business. A short time later, you will begin to receive high-pressure demands to pay for the merchandise you received.
What you should know: It is important to have an open line of communication with whomever handles your business’s finances and to double-check that any invoices your business satisfies are for services or products it actually ordered. If your business does receive products it did not agree to order, the business is not legally obligated to pay for those products.
Overpayment for Products or Services
What to look for: A fraudster contacting you online or by phone will give you what seems like a reasonable cause to overpay you for a product or service by check. The individual, feigning innocence, will then ask you to return the overpayment to them.
What you should know: In this scenario, the original check will be fake, even though it may initial clear your bank account. By the time your financial institution discovers the bad check, the fraudster already has the money you paid them and your financial institution will likely demand repayment for the missing funds.
Vanity Awards
What to look for: Your business or non-profit may receive an email, phone call, or award letter by mail mentioning that your entity has won an award in your industry. The only catch is you’ll need to pay for the plaque or certificate bestowing your business this honor.
What you should know: These awards are often meaningless and have no real value or industry recognition. If you or your business or non-profit is in the running for an award, you will likely know about it before you ever receive notice that you have won. If you are unsure if a supposed award is legitimate, do additional research before committing to any payment or formally accepting such recognition.
Imposter Scams
What to look for: Fraudsters impersonating a legitimate government or other official office will try to trick you by phone, email, or mail into paying an unnecessary fee or giving them private information.
What you should know: If you receive an unsolicited call or email from someone claiming to represent your utility company, a government agency, a tax office, the U.S. Department of Labor, a grant-making office, or a tech company claiming to have authority over your business’s URL, do not provide any information or offer of payment over the phone or by email. If you are worried the call may have been legitimate, research the contact information for the official office in question and contact them directly.