What You Should Know About Business Identity Theft?

Business identity theft?ever heard of it?

When talking about identity theft, we often have the tendency to refer to it in relation to the individual consumer. You would be hard pressed to find any information on how businesses are affected by identity theft.

However, business identity theft is a reality?a big one at that.

But before we begin?a caveat

The information provided on this page, and entire website is not intended to be nor should it be taken as legal advice. I continue to maintain that business owners and victims should always seek the advice of a qualified attorney for information regarding legal matters and specific responsibilities relative to the law.

Ok, moving on?

There are two ways in which a business can be affected by business identity theft. The business itself can be a victim, or the business owner(s)or the executives can be victimized.

The factors that determine the level and extent of the business identity theft include but are not limited to; the size and nature of the business, who was victimized and whether the theft was a result of action or inaction by the employees.

First let?s explore the ways in which businesses are affected by commercial or business identity theft:

Business owners as Victims of Identity Theft

Businesses of all sizes can be adversely affected if key executives become the victims of identity theft.This is because the executives themselves may have used their personal creditworthiness to guarantee loans, lines of credit or other credit accounts.

In much the same way, small businesses are especially susceptible to disruption of their day to day operations if the owner becomes a victim of identity theft because many times a small businesses continuity depends on the business owner,s personal effort, expertise, finances and creditworthiness.

Surprisingly, few business owners actually understand or recognize how business identity theft on the owner or top executive has the potential of crippling or causing the entire loss of the business.

What would happen if a business owner whose name was tied in with his/her business became a victim of identity theft?

For one, the business owner?s name and credit worthiness may be destroyed which would in turn affect his ability to raise capital, obtain credit and even impair his ability to make timely payments on existing loans.

Despite some legal protections and limitations on liability for fraudulent debt, the resolution of an Identity Theft incident, particularly in serious cases, can take months and even years to achieve.

Moreover, here?s another often overlooked fact. Most loan documents contain a provision which states that if the lending bank deems itself insecure, repayment of the loan may be called in early.

If numerous fraudulent accounts have caused the bank to no longer be confident of the business? long term viability, a business? loans or credit lines may suddenly be called and most businesses would simply not have sufficient resources (available cash) to fully repay the debt.

There are other ways that business identity theft may affect a business and its owner depending upon the business size and situation.

1.Loss of work time and earnings while the individual attempts to rectify and reverse the situation. The FTC states that the average victim of Identity Theft spends 200-600 hours attempting to resolve their case and restore his or her identity.

2.Out of pocket expenses that would have been otherwise used to grow and run the business. According to the FTC, the average out-of-pocket cost to an Identity Theft victim is approximately $1,500.

3.Inability to obtain a clean credit record could permanently cripple the business due to lack of access to financial sources to support the daily functions and growth of a business.

4.Adverse action by the IRS based on employment fraudulently gained by another individual using the business owner?s name and Social Security number. Often, the other individual may be a felon or illegal alien, or otherwise unable to gain employment. Additional W-2 forms and earnings reported in the victim?s name may cause significant and unexpected tax issues.

5.Ultimately, the loss of the business as a result of one of, or a combination of these factors and many others.

If the business is the main source of income for the owner, the personal financial situation of the business owner is at risk and so is his ability to support his family and take care of his obligations.

The Business Itself as a Victim Of Identity Theft

Businesses themselves do become victims of business identity theft.

?How?

Identity thieves may target the same types of identifiers and information that they would if they were targeting an individual.

For example they may obtain the business tax identification number, business financial information, checks and stationery containing business identifiers. They may then gain access to business accounts or pose as the business to open new accounts, obtain goods and services or even con and defraud existing customers.

Thieves are increasingly targeting businesses because they perceive them to be easy ?prey? for the following reasons:

1. Many businesses do not always carefully scrutinize employee charge card billing statements before they are paid, particularly those accounts for which multiple cards are issued.

2. Many small business credit accounts are linked to, or are guaranteed by, the owner?s own personal credit.

3.Businesses often enjoy extended payment terms and less transactional scrutiny for large purchases or high value ticket items than individual consumers.

4.Business information is easy to obtain. The Employer Tax Identification Number, often used as a business version of the Social Security number, is generally readily available from a number of sources, both online and off line. Business reseller, tax-exempt, and business license numbers themselves are usually publicly displayed on the wall, often as required by law.

5.Businesses maintain a great deal of information about their customers, and without proper security, training, and precautions, this information can easily be at risk.

6.Business stationery, including letterhead and business cards, is easy to obtain and duplicate.

7.Most businesses have a website that provides a great deal of information, and it also contains quality logos and graphics used for Phishing, Pharming, and bogus communications.

8.Most consumers and other business owners do not expect to be defrauded by a representative of a legitimate business.

9.Most businesses do not regularly review their business credit report.

10.Most businesses are eager to open new accounts with other businesses, and the process can be quite simple such as submitting a request on company letterhead along with the business license number and Tax ID.

11. Many employees of small businesses have access to a great deal of information, are not well-paid, and are susceptible to bribes.

The thief may be external or a trusted employee. As you can see, an almost irreversible amount of damage can be done against a business that is a victim of commercial identity theft.

In fact in many cases it is virtually impossible for the business to recover and restore itself to it?s previous state.

It is therefore imperative that business owners begin paying attention to identity theft and how it can adversely affect their livelihoods and lifestyles.

Unfortunately the effect of business identity theft does not end there.

Business owners have a responsibility to protect consumer information in their possession to the best of their ability especially in light of the new laws in place that place liability squarely on the business owner?s shoulders.

Source: http://www.yupedia.com/what-you-should-know-about-business-identity-theft.html

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