Proxyrack - January 25, 2023

U.S Business Fraud Report

Articles

U.S Business Fraud Report 

In 2021, over $5 billion was lost in the U.S. alone as a result of fraud, with business-related fraud being one of the most common forms.

Business fraud can be committed by people both inside and outside a business and it can appear in many forms, such as fake job opportunities, pyramid schemes, data theft, and false accounting.

There are plenty of ways in which businesses can keep themselves and their information safe from fraudsters. For example, it’s important to create strong and unique passwords. You can also use a residential proxy and install antivirus software, for extra precaution.

However, even whilst taking all of these precautions, hackers, and fraudsters can still sometimes manage to gain the information they need. Both employees and employers are targeted by fraud every day within the U.S. That’s why, here at Proxyrack, we wanted to find out which states in the U.S. are the business fraud hotspots of 2022.

In the first three quarters of 2022, there were almost 1.7 million fraud reports filed. We’ve taken a look at which states have received the most fraud reports in 2022 in the following categories: business and job opportunities, investment fraud, and office supplies and services. We’ll also be providing you with some tips on how to keep you and your business safe from fraudulent incidents.

The U.S States with the Highest Number of Business & Job Opportunity Related Fraud Reports


Business and job opportunities refers to offers to start a new business, work-at-home plans (e.g stuffing envelopes or processing medical claims), multi-level marketing schemes, job scams, job listings, employment services, inventions, or idea promotions.

In the first three quarters of 2022, there were a total of 69,557 fraud reports relating to business and job opportunities, with approximately $250 million being lost as a direct cause of this. The most common form of fraud this year, for all people aged between 20-79, was business imposter fraud, with the 60-69 age group falling victim to this the most.

Business and job opportunities refers to offers to start a new business, work-at-home plans (e.g stuffing envelopes or processing medical claims), multi-level marketing schemes, job scams, job listings, employment services, inventions, or idea promotions.


In the first three quarters of 2022, there were a total of 69,557 fraud reports relating to business and job opportunities, with approximately $250 million being lost as a direct cause of this. The most common form of fraud this year, for all people aged between 20-79, was business imposter fraud, with the 60-69 age group falling victim to this the most.


1. Nevada - 790 reports in total / 248 reports per 1 million people

Nevada is the state with the highest number of business and job opportunity-related fraud reports, with 248 reports per 1 million people and 790 reports in total.

In October this year, a Nevada resident pleaded guilty to fraudulently obtaining over $500,000 in Covid-19 relief loans, which were filed under the Small Business Administration's (SBA) Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program. The 51-year-old resident submitted at least 11 loan applications, with two being successful. The applications indicated that the two organizations had numerous employees, significant payroll expenses and substantial revenue, however, this was not the case.


2. Maryland - 1,284 reports in total / 205.18 reports per 1 million people

The state with the second highest number of business and job opportunity-related fraud reports is Maryland, with 205.18 reports per 1 million people and 1,284 reports in total.

Similar to the previously mentioned case in Nevada, in November this year, a Maryland resident pleaded guilty to federal wire fraud conspiracy, after unlawfully obtaining Covid-19 relief loans and unemployment benefits. The 25-year-old resident, alongside his co-conspirator, had created fictitious aliases by using the personal identification of real people, and used inoperative corporate organizations and new business entities with no actual business operations, in order to apply for PPP and EIDL loans, and unemployment benefits totaling over $750,000.


3. Florida - 4,443 reports in total / 201.17 reports per 1 million people

Florida has the third highest number of business and job opportunity-related fraud reports, with 201.17 reports per 1 million people and 4,443 reports in total.

In September of 2022, a Florida resident pleaded guilty to three cases involving paying and receiving unlawful illicit payments, healthcare fraud, and money laundering in New Jersey, Pennsylvania, and Florida. In part of the complicated case that spanned multiple years, the 58-year-old businessman and two co-conspirators formed a company called OptimuMD and purchased a 3% interest in Executive Pharmacy. This meant that those involved were to receive up to 70% of the gross revenue from the pharmacy, as well as receiving kickbacks (illicit payments) for fraudulent prescriptions. The resident admitted to receiving over $4.2 million from the scheme.

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The U.S States with the Highest Number of Investment Related Fraud Reports

Investment refers to opportunities in day trading, gold and gems, art, rare coins, companies that offer advice or seminars on investment, or other investment products.

In the first three quarters of 2022, investment-related fraud featured in the top three most common forms of fraud overall, with miscellaneous investments appearing in the top 10 most common forms of fraud in all age groups between 20-80+. Fraud reports relating to miscellaneous investments were the most common in the 30-39 age group, with 11,866 reports overall, totaling a loss of $22.02 million.


1. California - 9,376 reports in total / 234.43 reports per 1 million people


California is the state with the highest number of investment-related fraud reports, with 234.43 reports per 1 million people and 9,376 reports in total.

In August this year, a California resident was sentenced to 13 years in prison after pleading guilty to his connection to a nationwide investment scheme, which involved fraudulent wireless spectrum and dental franchise investments. The 70-year-old resident and his co-conspirators successfully deceived hundreds of retirement-age investors by convincing them to either invest in or send money to companies owned and controlled by the group of fraudsters. As a result of the fraudulent scheme, the victims suffered a total collective loss in excess of $20 million.


2. Nevada - 737 reports in total / 231.37 reports per 1 million people

The state with the second highest number of investment-related fraud reports is Nevada, with 231.37 reports per 1 million people and 737 reports in total.

In March this year, the FBI began searching for victims of a Ponzi scheme that had been operating in Nevada between 2017 and March 2022. The investment fraud scheme promised to return up to 13% within 90 days if victims invested either $80,000 or $100,000. It is thought that the majority of victims were introduced to the scheme in public places, such as churches and gyms.


3. Washington - 1,485 reports in total / 187.94 reports per 1 million people

Washington has the third highest number of investment-related fraud reports, with 187.94 reports per 1 million people and 1,485 reports in total.

In September this year, a former Washington resident faced a 25-count indictment for wire and securities fraud. Throughout the complex scheme, the 42-year-old used Twitter, press releases, securities filings, and claims of great wealth in order to convince marijuana business owners, private investors, and investors who purchased over-the-counter stock, to invest millions of dollars. He did this by creating a company that provided banking services to marijuana businesses in areas such as Washington, Colorado, and California. Between 2019 and 2021, he allegedly managed to receive money from three of these businesses, of which they lost approximately $3.7 million.

The U.S States with the Highest Number of Office Supplies & Services Related Fraud Reports


Office supplies and services refers to fraudulent or deceptive offers for items such as toner, copier paper, maintenance supplies, equipment maintenance contracts, classified advertising, and yellow page invoice scams, and website cramming schemes.

There were a total of 2,590 office-related fraud reports in the first three quarters of 2022, with 1,471 reports relating to directory listings and ad space, and 1,119 reports relating to supplies and services. The total loss reported due to office-related fraud in 2022 was $1.9 million.


1. Tennessee - 104 reports in total / 14.81 reports per 1 million people

Tennessee is the state with the highest number of office-related fraud reports, with 14.81 reports per 1 million people and 104 reports in total.

Back in 2019, there was a relatively high profile case of an office supplies-related scam, in which scammers rang various institutions claiming to be from office supply vendors, such as RJ Young. The scammers would tell the victims that there had been a cost increase to supplies, before offering the victim a considerable discount if they purchased items immediately. This led various institutions, such as Vanderbilt University in Nashville, to provide official warnings to its employees to be aware of the scam.


2. Alaska - 9 reports in total / 12.19 reports per 1 million people

The state with the second highest number of office-related fraud reports is Alaska, with 12.19 reports per 1 million people and nine reports in total.

In the past, there have been some large scale office related scams in Alaska, including the scam dubbed “Toner Phoners”. The scam involved an initial phone call from someone claiming to be from the company Xerox, telling the victim that the price of their toner had increased, but that they would be honoring the original price and someone would be calling them about their invoice promptly. The victim would then receive a second phone call from another individual asking for their email address in order to send the invoice over. It was later discovered that many companies in Alaska had been victims of the scam, with some agreeing to pay the fake invoice.


3. Montana - 12 reports in total / 10.88 reports per 1 million people

Montana has the third highest number of office-related fraud reports, with 10.88 reports per 1 million people and 12 reports in total.

In 2018, many businesses in Montana were victims of a yellow pages scam. Owners of businesses would receive a fake invoice in the mail, which featured the yellow pages logo and some contact information. The invoice would state that the company owes $500 and that the payment was already overdue, and therefore needed to be paid in order for their credit score to remain in good standing. If the fake invoice was paid, the business would then be hounded with further invoices in the mail and receive threatening phone calls.

10 Tips On How to Keep Your Business Safe From Fraud

Unfortunately, every business is at risk of falling victim to a fraud attack. This is due to the fact that there are so many different forms of fraud.

It’s important to realize that fraud can be committed by employees, customers, suppliers, and third parties which have no connection to the business.

Fraud can seem very complicated and hard to understand for some people, particularly because fraudulent criminals can have a lot of skills, tools, and techniques that the majority of people would find confusing and can’t even begin to understand.

There is no single solution that will allow you to escape fraudulent attacks. However, there are multiple precautions that you can take to minimize the chance of this happening. Here are ten top tips on how you can keep yourself and your business safe from fraud.


1. Be skeptical 

When you own and/or run your own business, it’s perfectly plausible to be skeptical about aspects of your business. In fact, it’s important to question things. Whether it’s a potential contract deal or opportunity, a new transaction, or an important document, be very thorough when checking through these things, and don’t be afraid to question people, in order to ensure that things are legitimate.


2.Make sure you know your business from the inside out

It’s also important to ensure that you have a thorough and genuine understanding of all aspects of your business, including how it operates, the staff you employ, who your target market is, the products and/or services that you provide, and all of your legal and regulatory obligations as a business. The more information that you know, the more familiar you will be with each aspect of your business. This will then allow you to be able to pick up on unusual activity more often.


3. Identify any potentially vulnerable areas within your business

When it comes to identifying potentially vulnerable areas, it’s a good idea to put yourself in the scammer's shoes. What information do they want/need? Where would they find this information? How would they access it? Once you have identified these areas, it’s important to ensure that they are protected and not easy to access. Ensure that all of these areas and the systems that are protecting them, are regularly checked and updated.


4. Protect your business against cyber attacks

With the advancement of technology in recent years, it’s essential to ensure that your business is protected from cyber attacks as much as possible. For example, as previously mentioned, some precautions that you can take include using a residential proxy, installing antivirus software, and creating strong and unique passwords. It’s also important to regularly back up all of your data, systems, and software.


5. Create a fraud procedure

In order to keep your business fully protected from fraud, it’s important that your employees are aware of the risks and potential losses, and that they know exactly what to do when/if they come across a potential scam or fraud attack within the company. All employees should know exactly who to go to, both within the company and a formal body, when reporting a fraudulent attack. It’s also important to keep them up to date with any changes within the procedure.


6. Protect your property

One of the most important assets of your business is, of course, technology. It’s particularly important to make sure that your laptops, computers, smartphones etc are all under insurance so that they are covered in case they are ever compromised or stolen. 


7. Understand your finances

Finances are one of the most important parts of a business. Without the availability of finances, a business wouldn’t be able to operate. That’s why it’s essential that you know every detail about the money aspects of your company. This includes knowing which methods of payment are available to your customer, thoroughly checking that all payments made to your business are legitimate, and thoroughly analyzing all of your business’s outgoings to make sure that they are accurate. 


8. Carry out pre-employment checks

Before they occur, one way to attempt to combat any potential fraudulent attacks from within the company is by carrying out pre-employment checks. This involves finding out if a potential employee has a previous criminal record (if they do, does it affect their suitability for the role within your business?), requesting references from people who know the candidate personally (such as previous employers) and potentially even carrying out online and social media checks. 


9. Create secure entry points

If your business has physical premises, it’s a great idea to have secure entry points around the building. For example, having key cards that provide time stamps of when members of staff have entered and exited certain areas, lets you know which employees have been in the building on particular days and times. In addition to this, you can also limit access to certain areas of your business’s premises e.g only IT staff have access to the server room. Key cards can also be used to gain access to the building, which prevents any unwanted visitors from entering the premises.


10. Always report fraud 

Perhaps the most important tip of all is to always report fraud. No matter how big or small the fraudulent attack on your business is, it’s essential that you receive help and advice from the right people so that you can get your business back on track.


Methodology:

We used World Population Review to gather the population figures for each of the 50 states within the U.S.

We then used Tableau Public to find out how many fraud reports had been made in each U.S state in the following categories: business and job opportunities, investment related, and office supplies and services. Data as of September 30 2022. Data published on November 3 2022.


To calculate the number of reports per 1 million people, we divided the number of fraud reports for each state by its population, before multiplying that figure by 1 million.



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