As business fraud proceeds to develop in complexity through 2025, it becomes necessary for businesses to be vigilant. Criminals are now employing sophisticated tools such as artificial intelligence, automation, and known weak spots to exploit businesses. The recent surge in cyber threats, identity theft, and monetary fraud has increased the need for businesses to protect themselves through business fraud prevention strategies. 

Understanding the different types of business fraud is important for businesses to avoid financial losses, legal trouble, and reputational damage. This article covers common and emerging forms of fraud schemes, examples of real-life occurrences, and some fraud preventive strategies for businesses can rely on to remain safe.

 

What Is Business Fraud?
 

Business fraud is any dishonest or illegal practice committed by individuals or organizations within a business, for financial, identity or competitive advantage. This can be internal, for instance, by the employees or through outsiders, like hackers, vendors, or even customers. Business fraud may take many forms, like cyberattacks or financial manipulations, and causes harm to businesses.

Real examples of fraud in businesses include forged invoices or phishing attacks. These acts can cause negative effects of frauds in businesses.

 

Common Types of Business Frauds

 

A. Financial Frauds

 

1. Embezzlement

 

Embezzlement is a type of business fraud in which employees steal company money for personal purposes, usually concealing their acts with forged invoices or manipulated finance reports. 

In 2022, Commercial Victimisation Survey (CVS), reported that 28% of businesses experienced crimes in the past year. The latest example was a tech startup losing $8 million when the CFO misappropriated company funds into his own accounts.

 

How Businesses Can Prevent Embezzlement Fraud

  • Conduct regular financial audits and transaction investigation help prevent small business frauds.
  • Implement segregation of duties within financial activities.
  • Utilize accounting software powered by AI that can detect anomalies.

 

2. Payroll Fraud

 

Payroll fraud is a type of business fraud that involves ghost employees or inflated wages. Businesses with big payrolls typically find it hard to detect fake staff, ghost payrolls, or inflated wages.

Payroll fraud exists in 15% of companies, according to a 2024 report by Association of Certified Fraud Examiners (ACFE), and the highest losses are incurred by small businesses with lower controls.

 

How Small Businesses can Prevent Payroll Fraud

 

  • Use automated systems for payroll verification.
  • Perform unannounced audits to find issues.
  • Limit access to payroll information on a need-to-know basis.

 

3. Invoice Fraud

 

Fraudsters create fake invoices or charge too much for their work, resulting in huge losses. A major retailer lost over $5 million in 2023 because they paid invoices from a fraudulent vendor who never even delivered the goods. The majority of companies, approximately 65%, admit to being a victim of invoice fraud at least once.

 

How Businesses Can Prevent Invoice Fraud

 

  • Verify all vendor invoices prior to issuing payments.
  • Use AI powered tracking tools for invoice monitoring.
  • Require dual authorization for high amount transactions.
     

 

4. Tax Fraud

 

Tax fraud is a type of business fraud that involves misreporting income or deductions to reduce liability. Businesses may face severe legal consequences when caught committing tax fraud. Read our comprehensive article on business fraud reporting to know the stepd on reproting business frauds.

 

How Businesses Can Prevent Tax Fraud

 

  • Keep clear, precise, and complete financial documents.
  • Have structured reviews of tax guaranteeing adherence to laws and regulations.
  • Utilize the services of licensed authorities for tax law compliance.

 

Also read 5 Fraud Trends in 2025


 

B. Corporate Identity Theft & Cyber Fraud

 

5. Business Email Compromise (BEC)

 

Business Email Compromise is a type of business fraud in which fraudsters pose as company executives or vendors to steal money or information.

According to the FBI, Business Email Compromise (BEC) scams cost American companies of around 2.7 billion dollars in 2023, which was a whopping 17% increase from the year before. Deep fake videos generated by AI made the scammers' job easier, while the voices and emails made it harder to detect the scam.

 

How Businesses Can Prevent  Business Email Compromise (BEC)

 

  • Employees need to be trained that verification of an email request needs to happen before any actions are taken.
  • Authentication protocols such as DMARC should be put in place.
  • Employ voice verification for transactions that are high in value.
     

 

6. Phishing & Social Engineering

 

Phishing is a type of business fraud in which Employees are tricked into providing personal and secure information by the use of social engineering and other tactics. 

In 2024, Verizon reported that data breaches amounted to 74 % as a result of human failure through phishing attacks.  Scammers are now able to write emails and talk in a certain manner which makes them more believable.

 

How Businesses Can Prevent Phishing Fraud

 

  • Employees should be trained regularly about the tactics used in phishing scams.
  • Use intelligent email security which is designed to block phishing attempts.
  • Verification procedures as well as strong access limitations should be put in place.


 

7. Data Breaches & Information Theft

 

Cyber-attacks take place when criminals gain unauthroized access to an organization with the goal of taking personal information and financial records. According to IBM, in year 2024, businesses suffer from an estimate of $4.88 million in data breaches 

 

How Businesses Can Prevent Data Breach Fraud

 

• Implement effective cybersecurity controls such as firewalls, data encryption, and multi-factor or two-step verification can prevent fraud in businesses.

• Software should be updated on a regular basis and access to sensitive files should be limited to necessary personnel only.

• Conduct frequent employee security awareness sessions and keep track of system health with AI systems.


 

8. Synthetic Identity Fraud

 

Synthetic Identity fraud is a type of fraud in which fraudsters take real and fictional information to create plausible fake identities to obtain credit or loan. 

In 2024 alone, this caused a loss of $6 billion to financial institutions because these fake identities are so easy to create using AI these days. This is now more common than any other type of fraud. 

 

How Businesses Can Prevent Synthetic Identity Fraud

 

  • Use biometric verification for identity confirmation and crosscheck the customer's information from multiple databases
  • Strengthening KYC processes.
  • Flag suspicious accounts without hesitation and track credit request for any irregularities.
     

9. Deepfake Scams

 

Deepfake frauds are AI-generated videos and voice recordings trick employees into authorizing fake transactions.

A 2023 case in Hong Kong saw scammers use deepfake video calls to steal $25 million by impersonating a CEO in a virtual meeting. Deepfake-related fraud has risen 3,000% since 2022.

 

How to Prevent Deepfake Frauds

 

  • Verify high-value transactions using callbacks or in-person confirmations before proceeding.
  • Train employees to identify deepfake warning signs and employ AI-powered detection tools.
  • Secure communication channels and establish strict verification protocols for unusual requests.
     

Also read 5 Ways to Spot Small Business Fraud 
 

C. Consumer & Vendor Fraud

 

10. Chargeback Fraud

 

Chargeback fraud in business is when clients manipulate charges for goods and services to get refunds, making businesses suffer losses.

According to the Visa 2023 report, Chargeback fraud is estimated to have cost e-commerce businesses  $100 billion internationally. Some fraudsters buy things by stolen credit cards and then say that the items were never delivered to them.

 

How to Prevent Chargeback Fraud in Businesses

 

  • Keep all records of transactions.
  • Integrate chargeback monitoring with AI fraud detection tools.
  • Enforce stringent identity verification on high ticket items.

 

11. Vendor Fraud

 

Vendor fraud is a type of fraud that occurs when a business is deceived by a vendor (or someone posing as one), often resulting in financial loss.

Dishonest suppliers may deliver substandard goods, overprice them or charge for goods that were never delivered. 

A vendor scam in 2023 led a multinational retailer to lose 10 million dollars as vendors were purportedly billing for fake sales. Forty-one percent (41%) of companies confirm that they have experienced vendor fraud at least once.

 

How to Prevent Vendor Fraud in Businesses

 

  • Perform background checks on vendors before contract signing.
  • Track vendor payments and do periodic reviews.
  • Automate service delivery using contracts management tools to minimize vendor fraud.

 

12. Return Fraud

 

Return fraud may happen in business when customers take advantage of return policies by returning stolen products with fake receipts, or by claiming previously used items to be defective.

In 2023 alone retailers in the United States were defrauded \$743 billion by return fraud according to the National Retail Federation. The return of online items is a major source of losses.

 

How Businesses Can Prevent Return Fraud

 

  • Apply AI and machine learning technologies to analyze return patterns and flag habitual offenders.
  • Create stricter return policies that involve proof of purchase and original packaging.
  • Use serial numbers, RFID tags, or barcodes to uniquely identify tracked returned items.

 

Related: Transactional Fraud: Examples, Impact, Detection and Prevention
 

 

D. Business Frauds

 

13. Digital Wallet Scams

 

Digital wallet scams is when scammers transfer victim’s bank cards to their own wallets, using them for unauthorized purchases.

These fraudsters enticed the victims over fake deals or offers for monetary help and proceeded to abduct bank details and one-time password (OTP) at a time. The digital wallets were set up in the victim’s name and transactions were often delayed in order to escape early detection. 

 

How to Prevent Digital Wallet Scams

 

  • Don’t part away with your OTPs and banking details to a stranger.
  • Check your bank statements regularly for suspicious transactions.
  • Change the method of verification to biometric for accessing the digital wallet.
     

14. Romance Scams

 

Romance scams is a type of scam in which emotions are used to extract money, even in business-related context, costing helpless victims a significant financial losses.

 

How to Prevent Romance Scams

 

  • Keep your guard up with online relationships where money is involved.
  • Use the video calling features to verify people's identities personally and cross check the details.
  • Do not give out private financial information to people you meet online.
     

15. Fraudulent Merchant Sites 

 

Fraudulent merchant sites are fake sites that take payments and disappear.

Using a background-check scam on dating applications, Visa’s intelligence team singlehandedly aided in preventing over $350 million dollars worth of fraud by taking down 12,000 fraudulent dating merchant websites. These threats were removed at the cost of covering more than $27 million dollars worth of victim losses.

 

How to Stay Safe From Fraudulent Merchant Sites

 

  • Check merchant websites before transacting.
  • Search for HTTPS encryption, and check for security badges. 
  • Do not fall for offers that are too lucrative.

 

You might like to read Business Fraud Protection 

 

Emerging Business Fraud Trends in 2025

 

1. AI-Driven Scams

 

Fraud now make use of Artificial Intelligence (AI) to create fake emails, documents, and even deepfake videos to deceive businesses and people with facilitated fraud.

Ranging from impersonation fraud and AI generated voice scams to fake job offers, AI is now capable of tricking employees into authorizing fund transfers.

Scams have become more convincing  with the help of AI tools,  A Proofpoint report found that 90% of all cyber attacks start with a phishing email, which shows how effective AI has made such attacks.

 

How to Prevent from AI-Driven Scams

 


 

2. Remote Work Risks

 

Remote work has created security loopholes that are being taken advantage of by hackers. Remote workers have their own devices and unsecured networks, so they are an easier target. 

IBM's 2024 Cost of a Data Breach Report showed that attacks on remote workers cost companies $4.88 million per breach, up 10% from previous years. 80% of bank cybersecurity leaders indicate they cannot keep up with AI-powered cyber attackers who are exploiting these vulnerabilities.

 

How to Prevent Remote Work Threats

 

  • Compel workers to work on company-approved VPNs and devices.
  • Require cybersecurity training and phishing simulations.
  • Utilize endpoint security to protect remote access.


 

3. Cryptocurrency Scams

 

The rise of digital currencies has fueled a boom in fraudulent schemes. Faked initial coin offerings (ICOs), Ponzi schemes, and hacked wallets have caused huge financial losses. In 2024, the SEC fined crypto companies a total of $4.6 billion

In India, cyber fraud cases in 2024 increased more than fourfold, and they lost $20 million, most of which were due to cryptocurrency scams. In the US, crypto scams loses rose by 45% according to the FBI, losing $5.6 billion in the year 2023 alone.

 

How to Prevent Cryptocurrency Scam

 


 

Interesting read Business Fraud Prevention Strategies 
 

Business Fraud Prevention Strategies

 

1. How to prevent frauds in business: 

 

Conduct regular audits, real-time transaction monitoring, and partner due diligence.

 

2. Ways to protect business from fraud:

 

Enforce encryption, multi-factor authentication, and strict access controls.

 

3. Ways to prevent frauds in small business:

 

Prioritize budget-friendly solutions like AI fraud detection, basic security training, and vendor checks.

Foster a culture of integrity with clear policies, awareness programs, and executive buy-in to support business fraud prevention.

 

FAQs on How to Prevent Business Frauds.

 

1. What are types of business fraud?


They include financial fraud (embezzlement, payroll), cyber fraud (BEC, phishing), identity theft, vendor and consumer fraud.

 

2. What is an example of fraud in a company?


Invoice fraud is common: paying for nonexistent goods due to fake vendor invoices, often costing millions.

 

3. What are the three classes of fraud?


Asset misappropriation, corruption/bribery, and financial statement fraud.

 

4. What are frauds in business?


Acts like phishing, deepfake scams, and vendor fraud that result in losses or reputational harm.

 

Final Thoughts

 

While fraud evolves, any business that remains vigilant, leverages intelligent security solutions, and equips their staff will be safe. 

Routine audits, partnership with other industries, AI fraud detection tools, and training help reduce damage from scammers. 

Youverify helps businesses with automating compliance, real-time threat detection, and advanced fraud prevention. A strong security infrastructure under a culture of integrity is the best fraud defense strategy for 2025. Book a demo with Youverify today.