In today’s digital age, identity theft isn’t just a personal issue—it’s a growing concern for businesses as well. Business identity theft occurs when a company’s information is stolen and used fraudulently to gain financial or operational benefits. This crime can result in significant financial losses, damaged reputations, and operational disruptions.
As a California business owner, understanding how business identity theft happens and what you can do to protect yourself is critical. Loker Law has been helping Americans deal with issues including identity theft and credit reporting errors for almost two decades, and now we want to use our knowledge and experience to help you protect your business.
This blog will walk you through the basics, warning signs, and practical steps to safeguard your company.
What Is Business Identity Theft?
Business identity theft involves criminals stealing a company’s identifying information—such as its name, EIN (Employer Identification Number), or banking credentials—to commit fraud. These thieves often use the stolen information to:
- Open fraudulent credit lines
- File fake tax returns
- Hijack existing accounts
- Purchase goods or services under the company’s name
Unlike personal identity theft, the impact of business identity theft can ripple through employees, customers, and stakeholders, making it even more crucial to address.
How Does Business Identity Theft Happen?
Understanding how business identity theft occurs can help you identify potential vulnerabilities. Here are some common ways thieves gain access to a business’s information:
1. Public Records Exploitation
In California, certain business information is publicly accessible through the Secretary of State’s website or other databases. While this transparency is essential for legitimate purposes, it can also make businesses an easy target for identity thieves.
2. Phishing Scams
Scammers often impersonate banks, vendors, or government agencies to trick business owners or employees into sharing sensitive information via email or phone.
3. Data Breaches
Cyberattacks on businesses or third-party vendors can expose sensitive data, such as EINs or banking details, to criminals.
4. Mail Theft
Business identity thieves sometimes steal physical mail containing sensitive documents like checks, invoices, or financial statements.
5. Employee Negligence
Untrained or careless employees can unintentionally expose sensitive information, such as login credentials or financial data, to fraudsters.
Warning Signs of Business Identity Theft
Recognizing the signs of business identity theft early can minimize the damage. Watch out for these red flags:
- Unfamiliar Transactions: Suspicious charges or withdrawals from your business accounts.
- Unauthorized Credit Lines: Notices of new credit accounts or loans you didn’t apply for.
- Tax Issues: IRS notices about unfiled returns or discrepancies in tax filings.
- Vendor Complaints: Calls or emails from vendors about unpaid invoices you didn’t authorize.
- Change of Business Details: Notifications that your business address, contact information, or ownership records have been altered without your knowledge.
If you notice any of these signs, take immediate action to investigate and secure your accounts.
How to Protect Your Business from Identity Theft
Preventing business identity theft requires proactive measures. Here’s some important steps to take in order to protect your business:
1. Secure Your Business Records
Limit access to sensitive information by keeping physical documents in locked filing cabinets and encrypting digital files. Shred documents you no longer need, and dispose of old computers or storage devices securely.
2. Monitor Your Business Credit
Regularly check your business credit report for suspicious activity. Credit monitoring services can alert you to unauthorized changes or new accounts opened in your business’s name.
3. Implement Strong Cybersecurity
Protect your company’s data by:
- Using strong, unique passwords for all accounts
- Implementing two-factor authentication
- Installing firewalls and antivirus software
- Regularly updating software to patch vulnerabilities
4. Train Employees
Educate your team on recognizing phishing emails, avoiding suspicious links, and safeguarding sensitive information. Employee awareness is a key line of defense.
5. Verify Public Records
Regularly review your business’s information on public databases like the California Secretary of State’s website to ensure no unauthorized changes have been made.
6. Be Cautious with Financial Transactions
Use secure payment methods and verify the legitimacy of vendors before making payments. Avoid sharing financial information over email or unsecured networks.
7. Protect Your EIN
Treat your Employer Identification Number like your Social Security number—only share it when absolutely necessary and with trusted parties.
Steps to Take If Your Business Is a Victim of Identity Theft
If you suspect your business has fallen victim to identity theft, act quickly to limit the damage. Here’s what to do:
1. Notify Your Bank
Immediately contact your bank or financial institution to freeze accounts and prevent further unauthorized transactions. Request new account numbers if necessary.
2. File a Police Report
File a report with your local law enforcement agency to document the crime. This report may be required for insurance claims or legal actions.
3. Contact the Credit Bureaus
Notify the business credit bureaus (Experian, Equifax, and Dun & Bradstreet) to place a fraud alert on your file. This will make it harder for thieves to open new accounts in your company’s name.
4. Report to the IRS
If tax fraud is involved, contact the IRS to report the issue and prevent further damage. Use Form 14039-B for businesses affected by identity theft.
5. Correct Public Records
If your business information has been altered in public records, contact the California Secretary of State to restore the correct details.
6. Consult an Attorney
Working with a consumer lawyer experienced in business identity theft (like Loker Law – it’s all we do!) can help you navigate the legal process, recover damages, and prevent future incidents.
The Impact of Business Identity Theft
The consequences of business identity theft can be devastating, affecting:
- Finances: Fraudulent charges and lost revenue can create financial instability.
- Reputation: Damaged trust with customers and vendors can harm your brand.
- Operations: Addressing identity theft diverts time and resources from running your business.
Taking preventive measures and addressing incidents promptly is essential to minimizing these impacts.
Loker Law Can Help You Protect Your Business
At Loker Law, we understand the challenges California business owners face when dealing with business identity theft. Our team is committed to protecting your rights, recovering your losses, and preventing future incidents. With years of experience in consumer law, we know how to navigate these cases effectively.
If your business has been targeted by identity thieves, don’t wait to take action. Schedule a free consultation with Loker Law today to discuss your case and explore your options.
