Financial fraud: pitfalls to avoid to protect your business

The director of an SME specializing in industrial design has just received an e-mail bearing the logo of a government intellectual property agency. The document, adorned with a familiar-looking letterhead, reminds him that his trademarks are expiring, and that an urgent payment of $30,800 is required to maintain his rights. Concerned about protecting his intellectual assets, he is about to make the transfer when his legal manager intervenes: the forwarding address does not correspond to that of the official body, and the charges are three times the usual rate.

The SME has just narrowly avoided intellectual property rights fraud, a phenomenon that ensnares many companies every year.

This scam is just one of the many financial fraud threats facing organizations of all sizes today. The financial consequences of this scourge are far-reaching.

In Canada, the average cost of a data breach was C$6.32 million per incident between March 2023 and February 2024, according to a report by IT company IBM. Despite a slight drop on the previous year ($6.94 million), this still represents a heavy price to pay. Added to this are other indirect costs: organizational instability, legal fees, reputational damage, etc.

More vulnerable businesses

The growing sophistication of fraudulent techniques, coupled with the accelerating digital transformation of businesses, creates an environment conducive to attacks. SMEs are particularly vulnerable. According to a Canadian Federation of Independent Business (CFIB) survey conducted in the fall of 2024,

half of SME owners have been victims of attempted or actual fraud in the last twelve months.

Among the most widespread fraudulent techniques, e-mail phishingremains the most frequent (85% of cases), followed by text message scams (77%) and fraudulent telephone calls (76%).

While the average cost of fraud is $7,800 per company affected, the impact extends far beyond this. Dealing with these incidents represents a considerable loss of time for 76% of the contractors involved, while 51% report a deterioration in their emotional well-being. Staff morale is also affected in almost a quarter of cases.

The main threats to your business

Companies are faced with many different forms of fraud. In this context, it has become imperative for managers to understand their mechanisms and strengthen their prevention systems.

Here’s an overview of the most common ones and effective ways of countering them.

Intellectual property scams

This fraud, mentioned in the introduction, targets companies holding patents or trademarks. Fraudsters send out notices that appear to come from the Canadian Intellectual Property Office (CIPO), reminding you to renew your intellectual property rights. The message contains sufficiently accurate information to appear legitimate, but the sums requested are usually well in excess of the actual costs.

Warning signs:

• • Check that the address is from an official organization. Look carefully at all the letters: it’s easy to confuse the letter “m” with the letters “rn”, for example. Pay close attention.
  • Real invoices should include verifiable details of patents held, information that you have shared only with the organization in question.

Best practices to avoid it:

• • Keep your renewal deadlines up to date, so as not to be caught off guard by a false application.
  • Contact the intellectual property organization directly to check the validity of the request before making payment.

The fraudulent CEO (or president)

It’s also known as “compromised business e-mail”. It involves pretending to be a manager in order to obtain an urgent bank transfer. The technique relies on sophisticated social engineering (manipulation techniques): the fraudster gathers information about the company and its executives via social networks, then uses this data to create a credible scenario.

Fraudsters exploit what is known as “psychological hacking”, playing on natural human reflexes such as respect for authority or the urgency of a situation.

The typical scenario involves a message sent by the CEO or another high-ranking executive to an employee in the accounting department, requesting an urgent transfer of funds to a new account, under the pretext of a contract in jeopardy or some similar reason. A recent variant involves gift cards: the fraudster asks an employee to purchase gift cards supposedly intended for staff, and to pass on the activation codes.

Warning signs:

• • Check if the pdg address has changed slightly.
  • An executive rarely requests a transfer by e-mail.
  • Fraudsters often use an insistent, urgent tone.

Best practices to avoid it:

• • Establish a strict payment validation procedure.
  • Encourage employees to check directly with the person concerned.
  • Set up in-house training to prevent fraud.

Fraudulent grants and loans

Fraudulent sites imitating those of reputable organizations promise businesses rapid access to grants or loans, often in exchange for an upfront payment. These sites display official logos, flags and misleading references to appear credible. They claim that funding is guaranteed, and that their service is essential for obtaining government aid.

Warning signs:

• • Check the site’s authenticity. Official government sites often end with “.gc.ca” in Canada and “.gouv.qc.ca” in Quebec.
  • Beware of up-front fees: no government agency requires up-front payment to access grants.
  • Consult official sources directly: rather than clicking on an unfamiliar link, go directly to the websites of the relevant ministries and agencies.

Best practices to avoid it:

• • Never share banking or personal information with unverified intermediaries.
  • Check with recognized organizations such as Service Canada or Services Québec for reliable information on government programs available to the public and businesses.

The business directory scam

A so-called directory provider contacts a company to “update” its information. After confirmation, the company receives an invoice for several hundred, even thousands of dollars, for a service it never requested. If the company disputes the invoice, the fraudster claims to have a sound recording “proving” the agreement, and threatens to send the matter to a collection agency.

Warning signs:

• • The fraudster puts pressure on to get a quick confirmation.
  • The directory in question often has little or no visibility on the Internet.
  • No serious organization threatens to collect to demand payment.

Best practices to avoid it:

• • Train employees to spot suspicious calls.
  • Always ask for a written contract before accepting a service.
  • Check the supplier’s legitimacy by consulting consumer protection organizations.

Office supplies fraud

It’s an enduring classic. Fraudsters pose as regular suppliers and entice companies to order supplies, sometimes under the pretext of regulatory requirements to replace “out-of-date products”. Another variant is to send an invoice for an order never placed, in the hope that it will be paid without verification.

Warning signs:

• • Unusual contact or an urgent request should always arouse suspicion.
  • Check suspicious invoices by calling the known supplier directly.

Best practices to avoid it:

• • Implement a strict order validation procedure.

Phishing and spear-phishing

Phishing and spear phishing are among the best-known fraud techniques. Fraudsters send e-mails that imitate those of financial institutions or business partners. Their aim is to trick the victim into clicking on a fraudulent link, which downloads malware, or divulging sensitive information such as passwords or bank details.

Warning signs:

• • Check the sender’s address. Fraudsters use similar domain names. For example: yourbank.co instead of yourbank.ca or yourbank.com.
  • Hover over links without clicking to see if they redirect to a suspicious address.
  • Never open unexpected e-mail attachments.

Best practices to avoid it:

• • Implement double-checking of financial transaction requests.
  • Make employees aware of the signs of phishing attempts.
  • Install cybersecurity software and activate anti-phishing filters.

Ransomware and malware

They are the most feared of all cyber threats. These computer programs are designed to interfere with the normal operation of systems. Malicious software (malware) can infiltrate systems via attachments, links in e-mails, or visits to compromised websites. Ransomware, on the other hand, encrypts corporate data, rendering systems unusable until a ransom is paid, usually in cryptocurrency.

Warning signs:

• • The company receives a message indicating that the computer is locked and requesting payment.
  • Files are rendered inaccessible without explanation.

Best practices to avoid it:

• • Make regular backups of sensitive data to ensure rapid recovery.
  • Install high-performance cybersecurity software.

The rise of (online) cybercrime thanks to AI

The year 2024 saw an unprecedented acceleration in cyberattacks, both in volume and sophistication. According to the CrowdStrike Global Threat Report 2025, cybercriminals have perfected their methods, moving away from traditional approaches to more stealthy and effective strategies.

One of the most striking findings is the rise ofmalware-free attacks, which accounted for 79% of detected intrusions in 2024, compared with just 40% in 2019. Rather than introducing malware, cybercriminals are exploiting legitimate remote access tools and social engineering techniques. Among these, voice phishing(vishing) has seen a spectacular explosion, with an increase of 442% between the first and second half of the year. This method involves impersonating a technical support or security manager to manipulate victims and gain fraudulent access.

At the same time, the use of compromised legitimate accounts has become the main vector for accessing cloud infrastructures. In 2024, 35% of cloud incidents were related to the abuse of valid credentials, a trend facilitated by the massive resale of such access on the dark web. Advertisements for remote access services have increased by 50% in one year, fuelling a veritable black market where cybercriminals can buy direct access to IT systems, the report reveals.

This evolution in tactics is accompanied by a worrying acceleration in intrusion time. In 2024, the averagebreakout time dropped to 48 minutes, compared with 62 minutes in 2023. Even the fastest attack observed took just 51 seconds to infiltrate other systems within the targeted network.

The report also shows that cybercriminals are not only refining their techniques; they are also taking advantage of advances in artificial intelligence (AI) to make their attacks more convincing. In 2024, groups used generative AI to create fake LinkedIn profiles, for example, making it easier to infiltrate companies under the guise of fictitious recruitment. Other groups exploited AI to generate fraudulent content and perfect phishing campaigns that were more realistic than ever. One example among many: in February 2024, malicious actors used public images of the CFO and other employees of a targeted company to create believable video clones using AI(deepfake). The victim company transferred $25.6 million to the cyber fraudsters before they realized the deception.

Strategies to counter these new threats In the face of this increasingly rapid and invisible type of cybercrime, traditional cybersecurity approaches based on malware detection are no longer sufficient. The time has come to implement proactive strategies including real-time monitoring, enhanced identity checks and advanced detection of suspicious behavior. Here are the key strategies to effectively protect your organization, according to CrowdStrike.

Securing the digital identity ecosystem Cybercriminals are increasingly targeting user identities through credential theft, multi-factor authentication bypass and social engineering. This enables them to move unobtrusively around the corporate digital environment. To avoid the trap, organizations need to adopt phishing-resistant solutions, such as hardware security keys (devices that reinforce online authentication). Strict identity and access management policies are also essential, including regular account reviews and access controls. Threat detection tools need to monitor behavior on all access points in the enterprise to flag any unauthorized access or creation of suspicious accounts. It is also essential to train users to recognize voice and e-mail phishing attempts.

Defending cloud as core infrastructure Attackers targeting cloud exploit configuration errors, stolen credentials and cloud management tools to infiltrate systems, move laterally and maintain persistent access for malicious activities such as data theft and ransomware deployment.

Protection platforms with detection and response capabilities are essential to counter these threats. These solutions help operators to quickly detect, prioritize and correct configuration errors, vulnerabilities and threats. Strict access controls also ensure continuous monitoring of anomalies, including connections from unexpected locations. Regular audits are also essential.

Again, while technology is essential for detecting and stopping intrusions, employees remain an important link in stopping breaches. Organizations should implement awareness programs to combat the constant threat of phishing and related social engineering techniques.

Internal fraud: an underestimated threat

Embezzlement by employees or managers remains a worrying reality. These frauds, often committed by people in positions of trust, can persist for several years before being detected.

Falsifying accounting or financial documents is another common form of internal fraud. Manipulating invoices, creating fictitious suppliers or diverting reimbursements are classic schemes that cost companies considerable sums of money.

According to the 2024 report from the Association of Certified Fraud Examiners (ACFE), corporate financial fraud resulted in losses exceeding $3.1 billion (B$) across 1,921 cases studied in 138 countries. On average, a fraud cost affected companies $1.7 million (M$), with an average duration of 12 months before detection. Even more alarmingly, experts estimate that 5% of company sales are lost each year due to fraud, representing a significant economic impact.

Fraud detection remains a major challenge. The ACFE report is unequivocal: reporting is by far the most effective method. They account for 43% of cases uncovered, three times more than any other method. By comparison, internal audit and management review detected only 14% and 13% of cases respectively.

Over half (52%) of these reports come from the organization’s own employees. Customers (21%) and suppliers (11%) are also important sources of alerts. This preponderance of reports underlines the importance of having appropriate channels for gathering this information. The report highlights a notable evolution in the means used. While dedicated telephone lines have long been the preferred channel, they have now been overtaken by e-mail reports (40%) and online forms (37%). A new channel is also emerging: text messages, used in 3% of reported cases.

In addition, the method of detection has a significant influence on the extent of losses incurred. Passive” detections (such as law enforcement notification) are generally associated with higher median losses (US$675,000) and longer durations (24 months) than “active” methods such as surveillance (US$65,000 and 6 months).

How to enhance detection

In the light of these data, several recommendations can be made:

1. 1. Multiply reporting channels: offer a variety of options for reporting suspected fraud (telephone, e-mail, web form, messaging).
   2. Raise awareness among all stakeholders: not only train employees, but also inform suppliers and customers of the means available to report any irregularities.
   3. Guarantee confidentiality: ensure that whistleblowers can report suspicious cases anonymously or confidentially, without fear of reprisal.
   4. Invest in proactive controls: prioritize active methods such as monitoring, account reconciliation and document reviews to detect fraud more quickly.
   5. Training managers: as they are often the first to receive informal reports (29% of cases), they need to know the appropriate procedures for handling such information.

In response to the growing ingenuity of fraudsters, vigilance and prevention must become daily reflexes. Investing in cybersecurity, implementing rigorous controls and raising employee awareness are no longer options, but necessities. When it comes to fraud, prevention is better than paying the ultimate price.

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