The past few years have seen an explosion in the rate of cybercrime globally – especially since the onset of the COVID-19 pandemic and the widespread switch to online operations.
According to cybersecurity experts, losses due to data breaches this year will exceed $6 trillion worldwide. That’s over 60 times the total tally of cybercrime in 2015.
Identity theft is one of the fastest-growing branches of cybercrime in 2022.
Personal identity theft already causes considerable difficulties for the victims. The Federal Trade Commission reports that in 2021 alone, there were over 1.4 million reported cases of cybercriminals commandeering someone’s identity for their own gain.
However, identity theft doesn’t just affect individuals. It is also well on its way to becoming a massive problem for businesses.
In this article, we’ll walk you through the key facts you need to know about business identity theft – and how you can protect yourself against it.
What is Business Identity Theft?
Business identity theft, also sometimes called corporate identity theft, means that cybercriminals hijack your business’ identity rather than your personal one.
Ultimately, their aim is to make a profit, typically either by demanding a ransom or through abusing your business’ name and financial information to generate illegal profits.
In either case, business identity theft can cause tremendous reputational, legal, and financial damage.
It’s important to note, though, that business identity theft is not the same as a data breach.
In a data breach, cybercriminals typically attack your system to extract information in bulk to use illegally. For instance, they could try to crack your customer database and sell their social security numbers or payment details on the dark web. In contrast, business identity theft means that they use your business information directly.
There are several ways in which they can hijack it for their own gain. Here are the most common kinds of business identity theft and how they could impact your business.
1. Losses Through Financial Corporate Identity Theft
One of the most common types of corporate identity theft is of a financial nature. That means that cybercriminals use your business information to engage in transactions.
For example, criminals can obtain new lines of credit, credit cards, or loans in your business’ name.
During the pandemic, it was extremely frequent for criminals to use a business’ identity to fraudulently apply for COVID relief. In August 2021, the Small Business Administration (SBA), which was in charge of administering the relief loans, reported that it had received 1.2 million complaints of loan identity theft.
For cybercriminals, hijacking a business’ identity for financial purposes has many advantages. Businesses often order items in bulk or engage in larger financial transactions, so this kind of activity arouses far less suspicion if a business is used as a front, rather than a private individual.
2. Tax Fraud and Ensuring Legal Battles
Another frequent form of business identity theft is cybercriminals filing fraudulent tax returns to obtain refunds or subsidies. This can happen both at the state and the federal level.
In many cases, the information necessary to commit this type of corporate identity theft is easy to obtain. Many companies even publish documents containing data like corporate sales tax numbers or business license numbers on their websites.
If your business identity has been compromised in this way, you face a long and complicated recovery process, including tax penalties and audits.
3. Trademark Ransom
One of the most insidious types of corporate identity theft is trademark ransom. Here, nefarious actors register your business’ name or your logo as an official trademark. Then, they demand a ransom from you for its release. Otherwise, you wouldn’t be able to continue using it.
This can seriously affect your business if you haven’t adequately protected it. Usually, this means filing the necessary trademarking paperwork with the U.S. Patent and Trademark Office.
If you haven’t filed a trademark on your business name, someone else can do it in your stead, and then claim you are in the legal wrong.
A problem at both the domestic and the international level, this type of identity theft was first reported in 2018. Back then, an investigation by the National Cybersecurity Society first typified it as a novel kind of scam after interviewing state officials on business identity theft.
4. Manipulated Online Identities on Your Website and Socials
Another way that identity thieves can compromise your business is by commandeering your online presence. In particular, that means your website and social media accounts.
In today’s online-first world, customers’ primary contact with businesses is often virtual. Even if they later do visit a physical store location, most people will first check a business’ website or social media profiles.
By manipulating what appears on your website and your profiles, cybercriminals can directly target customers who trust you.
For instance, they could use your social media profiles to spread malicious links. If customers click on them – expecting a coupon code or a new blog post on your products – they’ll end up installing ransomware instead.
Another strategy hackers use is to replace payment information on your website with their own accounts so that customer payments never reach you but end up in their pockets instead.
5. Loss of Reputation and Customer Trust
Finally, one of the most severe repercussions of business identity theft is also the most difficult to quantify: the loss of your reputation and your customers’ trust.
If your business’ identity does get hijacked and used for financial fraud, it will reflect negatively on you. Initially, it will appear like you were the one to commit the fraud. Ultimately, though, it signals that you were unable to protect your own business’ data. Consequently, potential customers or partners might well ask if you’d be at all capable of protecting theirs.
The situation is even more dire if criminals use your business’ identity to target customers directly – either through malware, fake invoices, or phishing messages.
They are unlikely to ever place their trust again in a company that is responsible for losing them money or causing them a major inconvenience.
It’s difficult to gauge the overall impact of corporate identity theft, especially since relatively few statistics exist. However, the summary effects of suffering a successful data breach can serve as a benchmark.
According to recent statistics, 60% of small and mid-size businesses shut down within six months of becoming victims of this type of cyberattack. The major reason behind this isn’t the financial damage, but the loss of customers’ trust.
How to Prevent Business Identity Theft
Considering all of these potentially disastrous financial, legal, and reputational ramifications of business identity theft, you need to put safeguards in place to protect yourself. And your customers, too.
Fortunately, there are a few straightforward, actionable steps you can implement to shield your company from identity theft. Broadly put, you need to stay vigilant, train your team, and invest in appropriate defenses.
Regularly Review Accounts
To begin with, you need to stay alert for any irregularities in any of your accounts. Especially for financial corporate identity theft, the first indication that something is not as it should be often comes in the form of unexplained charges and listings.
Keep a close eye on all of your retail credit cards and bank accounts, and especially your credit reports. In general, credit bureaus don’t exchange information between themselves, so you need to monitor your credit with all major consumer and commercial credit reporting agencies – Equifax, Experian, TransUnion, and Dun & Bradstreet.
If you see any charges that aren’t immediately obvious, or receives inquiries from loan offices you never contacted, it’s crucial to follow up immediately. That way, you’ll likely be able to limit or even prevent damage.
Instate a Cybersecurity Policy for Your Team
A chain is only as strong as its weakest link. The same goes for your team – especially when it comes to cybersecurity.
You need to make sure that you have cybersecurity protocols in place. And that every single member of your team knows how to follow them. The easiest way to do this is to make cybersecurity part of your onboarding process, and to have regular check-ins with your team members.
It’s crucial to issue guidance on what data can be shared, with whom, and under what circumstances. This goes especially for what can be made public on your website and social accounts.
In addition, you need to ensure that all your team members can easily recognize phishing attacks that aim to extract sensitive business information. They must also be comfortable using cybersecurity software.
Invest In Cybersecurity Software
A second element in strengthening your business cybersecurity defenses against corporate identity theft is to invest in appropriate software defenses.
In all likelihood, you’re already using basic protection such as password managers, VPN, and antivirus. (If you don’t, you really should!)
However, to prevent business identity theft, there are solutions that can go further. Identity theft protection software can ward off any attempts at extracting sensitive information. In addition, these solutions automatically monitor your financial accounts and credit ratings and flag any irregularities.
Furthermore, many identity theft protection services also offer dark web monitoring. This means that they deploy algorithms based on artificial intelligence and machine learning to scour the seedier corners of the internet to see if your sensitive business information shows up anywhere. If it does, you are notified and can take steps immediately.
This way, you’ll be immediately aware if your business name is used for any fraudulent purposes. Consequently, you’ll be able to limit the damage to your reputation and the danger to your customers by sending out a warning.
Protect Your Business Information
Finally, you need to ensure that the various elements that comprise your business identity aren’t publicly available. Or if they are, that they are legally protected.
Your business’ identifying information includes your company’s legal and trade name, its legal entity type, address, and formation date. To protect this information, you need to know exactly how and where it is stored and who has access to it.
In addition, you need to carefully manage the data that is held with your state registry office. First, you need to know exactly in which states you’re registered to do business. Once you are aware of that, you can select a strong password and username for any online access portals to make sure your data is protected. Some states also let you subscribe to automated alerts. That way, you’ll receive an email every single time your information is modified. Similarly, some states provide the possibility to activate two-factor authentication. This is a fantastic additional safeguard.
With regard to your online presence, you also need to take steps to keep your accounts and your website safe. Make sure that your social media accounts are protected by complex passwords. Where possible, activate two-factor authentication.
In addition, you should carry out regular website backups and malware scans. Make sure that you have an active firewall and that any transactions that take place via your site are protected by HTTPS. Generally, most cybersecurity website plugins will provide this level of protection, especially if you invest in their premium plans.
Finally, it’s crucial to officially register a trademark for your company’s name and logo – in any country you want to do business in. This preempts any attempts at trademark ransom.
Start Building Your Defenses Against Business Identity Theft Now
Corporate identity theft can easily spell disaster for your business. Hackers abusing your business’ name to commit fraud, spread malware, and scam your customers has a multitude of negative impacts – from financial damage to losing your customers’ trust.
To protect yourself, you need to be on your guard and monitor your business information and financial accounts closely. Watch out for red flags and react immediately if you see them.
Make sure your team adheres to strict cybersecurity standards and knows which information needs to be kept confidential.
Invest in cybersecurity software, especially identity theft monitoring services, and protect your business information by strengthening account security and registering trademarks.
That way, you will be able to keep your business identity safe, and protect yourself and your customers.