What are the types of Business Frauds?
- azakaw
- Jul 18
- 6 min read
Updated: 1 day ago
Business fraud is no longer a peripheral concern for modern businesses; it’s a central threat to trust, continuity, and compliance.
From phishing emails to payroll tampering, fraudsters are evolving faster than many companies can respond. And as operations become increasingly digital, the exposure multiplies.
Whether you’re a small business owner or managing risk in a large organisation, understanding how business fraud manifests and how to stop it is essential.
This article explores the most common types of fraud in business, provides actionable prevention strategies, and outlines what every organisation should do to build a fraud-resilient environment.
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Business Fraud: what it is and why it matters
What is Business Fraud?
Business fraud refers to dishonest or illegal actions carried out by individuals or entities to gain an unfair or unlawful advantage, typically involving deception, concealment, or abuse of trust.
It may be committed internally (by employees or executives) or externally (by cybercriminals, vendors, or customers), and can target financial assets, customer data, operational processes, or intellectual property.
The threat of fraud goes beyond immediate monetary loss. According to the ACFE’s 2024 Report to the Nations, organisations worldwide lose an average of 5% of their annual revenue to fraud.
A figure that reflects more than $3.1 billion in total losses. Median loss per incident is now $145,000—a 24% increase since 2022—and nearly one in five incidents cost over $1 million
Why recognising Business Fraud is crucial
The threat of fraud isn’t just about lost money; it’s about regulatory penalties, reputational harm, and even the collapse of operations.
Small businesses are especially vulnerable, often lacking dedicated compliance teams or advanced fraud detection systems.
According to the Association of Certified Fraud Examiners (ACFE), organisations lose an estimated 5% of their annual revenue to fraud each year.
The broad impact of Business Fraud
Fraud affects every dimension of business health:
Financial Losses: Embezzlement, overbilling, and transaction fraud directly hit cash flow.
Operational Disruption: Cyberattacks or invoice scams can halt operations.
Regulatory Risk: Failing to prevent or report fraud can lead to fines or license revocation.
Brand Damage: Public knowledge of fraud can permanently erode trust.
What are the types of Frauds in Business?
The most common types of fraud in business are:
Identity theft and digital onboarding fraud
Phishing scams
Financial fraud
Cybercrime & data breaches
Investment frauds
Inventory and asset misuse
Fake invoicing and procurement fraud
Tax and insurance fraud
Understanding the various types of business frauds and cyber-enabled scams is the first line of defence.
TIP: Read our article to be aware of the common types of fraud
Identity Theft & Digital Onboarding Fraud
One of the most common types of identity theft is stealing the identity of a business. It occurs when a fraudster impersonates a company to commit unlawful activities, such as opening credit lines, filing false tax returns, or obtaining goods under false pretences.
In today’s digital-first world, fraudsters use synthetic IDs, deepfakes, and SIM-swap schemes during onboarding processes.
A 2025 study highlighted that businesses relying on static verification like OTPs are particularly vulnerable to automated scams and identity spoofing.
Examples:
A criminal registers a business with a similar name to receive payments meant for the legitimate entity.
Fraudsters hijack business credentials to access sensitive systems or accounts.
Consequences:
Financial losses
Tax complications
Credit score damage
Reputational harm
Case study (Fintech Onboarding)
A fast-growing fintech drastically reduced fraud—while accelerating customer onboarding—by implementing AI-driven identity verification. They replaced manual checks with biometric matching and real-time risk scoring, reducing fraud losses by over 65% and onboarding time by fivefold.
Prevention tips:
Use multi-factor authentication (MFA) across systems.
Regularly monitor credit and registration records.
Secure and limit access to sensitive business documents.
Phishing Scams
Phishing attacks trick employees into disclosing confidential information or downloading malicious software.
These often mimic emails from trusted sources, such as banks, vendors, or senior executives.
Tactics include:
Business Email Compromise (BEC): Spoofed emails from executives requesting urgent wire transfers.
Credential Harvesting: Fake login pages to steal passwords.
Malware Delivery: Attachments containing ransomware or trojans.
Case study
A European manufacturing firm lost over $40 million after fraudsters posed as its CEO in a phishing email, directing an employee to wire funds to a fraudulent account.
Prevention tips:
Train staff to recognise suspicious email patterns.
Use email authentication protocols (SPF, DKIM, DMARC).
Simulate phishing attacks internally to boost awareness.
Modern detection tools, such as transaction monitoring software, can flag potential red flags, including unusual transaction patterns or changes in destination after approval.
Financial Fraud (Asset Misappropriation)
This broad category includes manipulations of financial systems to benefit individuals or hide losses.
Asset misappropriation remains the most common type of business fraud, appearing in 89% of cases with a median loss of $120,000.
Executive-level fraud is more costly, with a median amount of $500,000, five times higher than typical employee fraud.
Common examples:
Embezzlement: An employee siphons off company funds.
Payroll fraud: Ghost employees on the payroll or inflated hours.
Billing schemes: Creating fake suppliers or inflating invoices.
Cheque fraud: Forging or altering company cheques.
Warning signs:
Unexplained variances in financial reports.
Resistance to audits or segregation of duties.
Employees with lifestyle changes that don’t align with their salaries.
Prevention tips:
Enforce dual authorisation for financial transactions.
Conduct surprise audits and use continuous accounting tools.
Implement strict vendor onboarding procedures.
Useful content: How to prevent financial crimes
Cybercrime & Data Breaches
As digital infrastructure becomes core to business operations, cybercrime has become a dominant fraud vector.
Common forms:
Ransomware: Malicious software locks systems until a ransom is paid.
Data breaches: Unauthorised access to confidential business or customer data.
Man-in-the-middle attacks: Intercepting communications or payments.
Crypto wallet theft (for businesses dealing with digital assets).
Read also: Anti-Money Laundering in Crypto
Why it matters:
Cybercrime causes both immediate financial losses and long-term reputational damage. Regulatory fines (like GDPR or DIFC Data Protection Law) can be severe in the case of breaches.
Cyber attacks, including ransomware, data breaches, account takeovers, and deepfake ID fraud, are on the rise.
In 2024, AI-generated deepfakes surged by 700%, and 57% of document fraud leveraged such techniques.
Prevention tips:
Implement endpoint protection and network monitoring tools.
Regularly update and patch software systems.
Back up critical data in secure, off-network locations.
Investment Frauds
Fraudulent schemes that promise high returns with little risk—such as Ponzi schemes—can target businesses or be run under the guise of corporate investment arms.
Inventory and Asset Misuse
Employees using company property for personal gain, or inventory shrinkage from internal theft.
Fake Invoicing and Procurement Fraud
Third parties or employees manipulate procurement processes to divert funds. This is one of the most used methods for cleaning dirty money.
Tax and Insurance Fraud
Underreporting income or overstating losses to gain a financial advantage from tax authorities or insurers.
How to prevent the different types of fraud in business
To defend against the wide range of threats, organisations must take proactive, policy-driven action.
1. Foster a culture of awareness
Lead with ethics from the top.
Encourage whistleblowing with anonymous reporting channels.
Integrate fraud risk awareness into daily operations.
2. Implement robust internal controls
Define roles and responsibilities clearly.
Segregate financial and operational duties to prevent single-person control.
Use secure access management and audit trails.
3. Regular training and education
Conduct periodic training on recognising fraud signs.
Keep teams informed about emerging fraud tactics.
Tailor fraud prevention education to roles (e.g., finance, HR, IT).
Read also: What is AML training for employees?
4. Monitor and audit continuously
AI-backed transaction monitoring, surprise audits, and policy-led checks enable early detection and prevention.
FAQs
What are the types of fraud in e-commerce?
E-commerce frauds include fake chargebacks, account takeovers, triangulation schemes, and card-not-present scams.
How long does it take to detect business fraud?
According to ACFE, the median duration of fraud before detection is 14 months, highlighting the need for continuous monitoring.
How can business fraud be prevented?
By implementing layered defences: employee training, internal controls, fraud monitoring software, and a culture of ethical accountability.
How do I report business fraud?
In most jurisdictions, fraud can be reported to national regulators (e.g., SEC, FCA, or DFSA), law enforcement, and sometimes specialised agencies like cybercrime units. Internal reporting mechanisms should also be in place for employees.
Conclusion
Business fraud is multifaceted and ever evolving. From phishing scams to payroll manipulation, no organisation is immune.
However, by understanding the various types of fraud in business, companies can better protect themselves against the financial, legal, and reputational consequences that follow.
Fraud prevention begins with awareness and is strengthened through effective systems, policies, and education. Whether you’re a startup navigating rapid growth or a mature enterprise with multiple departments, now is the time to strengthen your fraud defences.
At azakaw, we help businesses prevent and detect fraud through modern compliance infrastructure, including Digital Onboarding, Transaction Monitoring, and Corporate Compliance tools that are built for today’s risk landscape.
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