How Identity Thieves Target Businesses

Identity Thief

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Business identity theft can close a company's doors. Worse, the owners can become personally liable for a thief's actions if the business isn't structured to protect them from that risk.

Businesses do have an identity, and they can be victimized by an identity thief just like a person can.

Every American business has its own version of a Social Security number—called a Federal tax ID number or Employer Identification Number (EIN)—that can be stolen by an identity thief. Thieves can use this information to open lines of credit, file fraudulent tax returns, access bank accounts, steal cash, and more. When this happens, it can be very difficult for businesses to recover—especially smaller ones.

What Makes a Business a Tempting Target

Business identity theft costs businesses in the U.S. billions of dollars each year.  There are many reasons an identity thief may choose to target businesses over individuals:

  • Higher credit limits and big purchases: Even small companies tend to have generous credit terms and are not necessarily monitored as closely by the bank since banks expect companies to make large-ticket purchases.
  • Multiple accounts and limited purchase scrutiny: Some companies have several credit cards on a single account and don't bother looking over the itemized list of charges before they pay the bill.
  • Critical information is easily available: It's relatively easy to collect information about a public business. For example, most companies display their business license in the lobby, sometimes because they are required by law to do so. Getting a company's EIN is fairly simple since it's public record. This may even be available online.
  • Accounts are relatively easy to open: It's easy for an identity thief posing as a business to get a line of credit with another company. Sometimes all it takes is a request on your company's letterhead (also easy to obtain,) that includes the business license number and tax ID.

A Case Study: Village View Escrow

When an identity thief attacks a company, they can hit hard and fast. The case of Village View Escrow, Inc. is a perfect example.

An identity thief was able to hack into their computers, and in less than two days the company lost almost $500,000. Although the owner of the company could not recall a single international transfer in the previous two years, Professional Business Bank (now Bank of Manhattan) allowed 26 of them to go through without even calling to ask about the unusual activity. The hackers had disabled their email verification service.

Four months after the loss, the company had found very few resources that would help. The owner had to let employees go and even declined her own salary in an effort to keep the doors open.

How Businesses Can Protect Themselves

There a number of precautions businesses can take to help protect themselves against identity theft:

  • Ensure digital data security: It's worth investing in the best data security tools your company can afford, including firewalls, anti-virus software, and anti-malware software, and more.
  • Secure important documents: Lock up paper documents in secure locations, and shred all other mail before throwing it away. Move to electronic statements and billing where possible.
  • Monitor the credit report: Get a credit monitoring service to help you keep an eye on the business' credit report and be alerted right away of any changes.
  • Educate employees: Make all employees aware of data security measures and what's expected of them to help keep the company's information safe.

It's best for companies to take all signs of suspicious activity seriously and to act quickly to investigate.