Protecting Your Business From Identity Theft

When we think about fraud committed against individuals, many of us immediately think of identity theft. Identity theft is the taking of a victim’s private information (such as their social insurance number or birthdate) to use for financial gain.

Examples of identity theft include applying for and using a credit card with the stolen information. Our awareness of identity theft as a crime has increased significantly over the past few years, because the issue has been regularly featured on the news and in popular culture, and the risks have been frequently highlighted by financial literacy organizations (such as CPA Canada).

What is business identity theft?

Though many people are well aware of the risks of individual identity theft, what is not as commonly known is that identity theft can just as easily happen to a business. Identity theft for a business has the same definition as for an individual: acquiring a business’s private information to use for financial gain.

Why does business identity theft happen?

Any person(s) committing fraud, including identity theft, will typically need to have all three of the following factors: incentive, rationalization and opportunity.

What information is needed to commit business identity theft?

For individual identity theft, a person’s social insurance number (SIN) and birthdate are key pieces of information to acquire. For a business, the key information to protect against identity theft is your company’s business number (BN) and/or provincial tax identification number. In Ontario, that would be your Business Identification Number (BIN). Other key information that may be used for business identity theft include:

  • legal corporate / business name
  • mailing address
  • supplier names
  • customer names
  • employee information (e.g., email addresses and phone numbers)

What are examples of business identity theft schemes?

There are several ways in which a business identity thief can use the acquired information for financial gain. Examples include:

  • transferring funds out of the business bank accounts
  • opening and using a corporate credit card
  • applying for and receiving a loan from the bank
  • making large business purchase orders
  • filing false tax returns to receive refund amounts from the government

Consequences of Business Identity Theft?

The consequences of identity theft for a business, much like for an individual, is lost time and money. Examples include:

  • loss of revenue and cash from the business if fraudulent purchases are made
  • reputational damage if the fraudulent use of the business’s identity is carried out in ways that are antithetical to the business
  • tax liabilities to the government if fraudulent corporate tax returns are filed

Mitigating the Risk of Identity Theft

To mitigate business identity fraud, there are both preventative and detective actions that can be taken. Preventative actions help to protect against the theft occurring in the first place. Detective actions help to discover the business identity theft before significant losses have occurred.

Disclaimer: Avisar Chartered Professional Accountant’s blog deals with a number of complex issues in a concise manner; it is recommended that accounting, legal or other appropriate professional advice should be sought before acting upon any of the information contained therein.

Although every reasonable effort has been made to ensure the accuracy of the information contained in this post, no individual or organization involved in either the preparation or distribution of this post accepts any contractual, tortious, or any other form of liability for its contents or for any consequences arising from its use.