7 Types of Fraud Risk Facing Businesses – And How to Avoid Them

September 18, 2025

Business owners in the Southeast Texas Gulf Coast region face a changing landscape of fraud threats that can affect any size company. From holiday scams to sophisticated ransomware attacks, the types of fraud risk confronting today’s businesses can be highly complex.

For business leaders in our region, understanding these risks goes beyond protecting your bottom line. Taking action may help you safeguard your reputation, maintain customer trust, and ensure your business can continue to serve customers in your community.

A good start is to implement a comprehensive risk management strategy that addresses both internal and external threats. Before developing a plan, though, it’s important to understand the threats in play.

Let’s explore what’s happening right now. We’ll also explain how businesses may be able to prevent and detect fraud through proven security measures and a strategic partnership with our Treasury Services team.

Understanding the Types of Fraud Risk Facing Your Company

Today’s criminals operate with increasing sophistication. They study your business patterns, exploit vulnerabilities, and often combine multiple fraud types to maximize their impact. A proper fraud risk assessment should include evaluating not just obvious external threats, but also considering how internal processes might be exploited.

Let’s review the types of internal and external risks that could affect your company.

1. Holiday Scams Targeting Businesses – And How to Avoid Them

The holiday season brings unique challenges for fraud prevention, as criminals specifically target increased business activity during this period. These scams have become more sophisticated, often mimicking legitimate seasonal business communications to bypass standard security measures.

Be aware of some typical holiday fraud schemes including:

Fraudulent vendor invoices that appear to come from trusted suppliers requesting payment for non-existent seasonal inventory or services.
Spoofed executive communications where criminals impersonate company leaders requesting urgent wire transfers for “time-sensitive” holiday opportunities.
Fake shipping notifications containing malware-filled links that employees click, thinking they’re tracking legitimate holiday deliveries.
Charitable donation scams where fraudsters create fake nonprofits and pressure companies into making year-end contributions.
Seasonal hiring fraud involving criminals posing as temporary agencies or workers to gain access to sensitive payroll and financial information.

To help protect your business during the holiday season, implement enhanced verification procedures for all financial requests. You can also establish a policy that requires verbal confirmation of any payment changes or urgent transfer requests, even when they appear to come from executives.

Be sure to train employees to recognize suspicious activity in emails and require additional approval layers for all vendor payments during peak seasons.

2. Why Dual Control Could Save Your Business from a Six-Figure Mistake

Putting one person in charge of a financial task is a recipe for fraud. Even if that person does not commit fraud, they could inadvertently hurt your company if a fraudster steals their login credentials or infiltrates their access to your accounting software.

One of the most effective fraud prevention strategies involves implementing dual control procedures for financial transactions. This approach may increase the effectiveness of internal controls by helping to ensure that no single person can authorize significant outgoing payments through your business banking systems.

Under dual control systems, you can increase the security of financial transactions by implementing this type of workflow:

One employee initiates wire transfers, ACH batches, or other electronic payments.
A separate authorized person reviews and approves each transaction before funds transfer.
Both individuals share accountability for verifying transaction legitimacy and accuracy.
The system creates an audit trail documenting both the initiator and approver for every payment.

This simple but powerful control can prevent businesses from relying too heavily on one individual’s judgment or access. It also creates a natural checkpoint where errors or red flags may be caught before money leaves your account.

We’ve seen many businesses suffer six-figure losses because only one person had the authority to move funds. A lack of dual control eliminated any opportunity for secondary review, which dearly hurt the company.

Dual control also provides protection against insider fraud while aligning with corporate governance standards. It demonstrates to auditors, partners, and stakeholders that your organization takes financial stewardship seriously.

3. Check Fraud Is Back – What Your Business Should Do Now

Despite the digital transformation of business payments, check fraud has experienced a resurgence. Criminals are targeting corporate checks through increasingly sophisticated methods that can result in substantial financial losses and compromised account information.

Some of the current check fraud trends include the following:

Mail theft targeting corporate checks where criminals steal outgoing payments and use chemical washing to alter payee information.
Counterfeit check creation involving sophisticated replication of company logos, signatures, and account details.
Account information harvesting where stolen check data exposes routing and account numbers for subsequent fraudulent ACH attempts.
Vendor impersonation using copied check information to create false payment instructions.

The impact extends beyond immediate financial loss. When criminals obtain your routing and account numbers from stolen checks, they can attempt to create fraudulent ACH debits against your business account. Additionally, vendors or employees may lose confidence in your company’s ability to safeguard financial processes.

We recommend protecting your business by implementing our Check Positive Pay services, which match issued checks against your bank’s database before processing.

We also recommend switching from checks to electronic payments for routine vendor relationships and never leaving outgoing checks in unsecured mailboxes. You can also provide training to staff members to identify altered or suspicious checks, as well as establish procedures for immediate bank notification when check theft occurs.

4. Why Business Email Compromise (BEC) Could Affect Your Entire Company

Business Email Compromise (BEC) represents one of the most significant fraud risks facing corporations today. These sophisticated attacks target the communication channels your business relies on daily, making them particularly dangerous and difficult to detect.

BEC attacks typically involve the following types of schemes:

Executive email spoofing where criminals create fake email accounts that closely mimic company leadership.
Vendor account infiltration involving actual compromise of supplier email systems to send false payment instructions.
Social engineering tactics that exploit employee trust and urgency to bypass normal verification procedures.
Payment redirection schemes where legitimate transactions are diverted to criminal-controlled accounts.

Because BEC requests often appear to come directly from trusted executives or established vendor partners, employees frequently comply with payment instructions before realizing the communication was fraudulent. Losses from these schemes frequently reach six or seven figures, making BEC one of the most devastating risks facing corporate finance teams.

Your company can combat BEC through multi-layered email security, employee education about verification procedures, and established fraud detection protocols for confirming any payment changes through separate communication channels.

Pro Tip: Never rely solely on email for financial transaction approvals, especially when requests involve urgency or changes to established payment patterns.

5. What Makes Corporate Payroll Fraud a Real Issue?

Corporate payroll systems present attractive targets for both external criminals and dishonest employees. These fraud schemes can continue for extended periods before detection, potentially resulting in significant financial losses, as well as legal complications.

Some common payroll fraud methods include:

Direct deposit redirection where criminals submit false change requests to divert employee paychecks.
Ghost employee schemes involving the creation of fictitious workers to generate fraudulent paychecks.
Overtime manipulation where employees or supervisors falsify time records for additional compensation.
Benefits fraud including false claims for health insurance, workers’ compensation, or other employee programs.

The challenge with payroll fraud is that it often appears legitimate within your normal business operations. Regular payroll processing obscures fraudulent transactions, and busy HR departments may not catch subtle changes to employee information or payment instructions.

We recommend implementing a segregation of duties in payroll processing, requiring management approval for all employee payment changes, and conducting regular audits of payroll records. For new employees, you can establish verification procedures to maintain careful oversight into new information entering your software systems.

6. Concerns About Ransomware? Your Security Systems Matter

Ransomware attacks pose significant threats to businesses of all sizes by encrypting critical systems and demanding payment for restoration. These attacks can shut down operations entirely while exposing sensitive financial and customer data.

Ransomware typically targets the following systems that managers and employees use on a daily basis:

Enterprise Resource Planning (ERP) and accounting systems that contain your critical business data
Customer databases with personally identifiable and payment information.
Communication systems including email servers and internal networks.
Backup systems to prevent easy recovery and increase pressure to pay ransoms.

The impact of this identified fraud risk extends well beyond the immediate ransom demand. Businesses often face operational downtime, delays responding to customer requests, potential regulatory penalties, and long-term reputational damage. Recovery often requires extensive IT remediation and system rebuilding, even when ransoms are paid.

You can help protect your organization through regular system updates, employee cybersecurity training, comprehensive data backup strategies, and network segmentation that limits attack spread.

Pro Tip: Consider adding cyber insurance coverage and developing incident response plans that can be activated immediately when attacks occur.

7. Insider Fraud Can Affect Any Size Company

Insider fraud is not exclusive to publicly traded companies. This type of risk can affect any company, as it involves individuals who possess legitimate access to financial systems and sensitive information.

These schemes often continue undetected for extended periods, resulting in substantial losses and damaged internal trust. The common types of insider fraud include the following:

Financial statement manipulation where employees alter records to conceal theft or other misconduct.
Unauthorized transactions using legitimate system access to move funds inappropriately.
Vendor kickback schemes involving collusion with suppliers to inflate invoices or redirect payments.
Expense account abuse where employees submit fraudulent reimbursement requests.

The key to preventing insider fraud lies in establishing strong internal controls that create natural checks and balances within your organization. No single employee should have complete control over any financial process from initiation through completion.

We recommend implementing regular fraud investigation procedures, maintaining clear segregation of duties, and conducting periodic reviews of employee access levels. You can also create anonymous reporting mechanisms that allow concerns to be raised without fear.

How Texas Gulf Bank Helps Businesses Strengthen Security

What are the best responses to the threats we identified? The most effective approach to managing fraud risk involves layering multiple protection strategies rather than relying on a single solution to cover every potential threat.

A comprehensive approach may help prevent and detect fraud at various stages of a fraud threat, reducing both the likelihood of successful attacks and the potential for significant financial losses.

At Texas Gulf Bank, we understand the fraud challenges facing businesses in the Southeast Texas Gulf Coast region because we’ve seen virtually every iteration of these schemes. Our dedicated Treasury Management team works directly with business customers to implement comprehensive security solutions tailored to each company’s specific operations and risk profile.

Our tools to assess and help prevent fraud risk include the following:

Check Positive Pay to stop altered or counterfeit checks before they clear your account.
ACH Positive Pay with filters and blocks to control unauthorized electronic debits.
Dual control authorization for high-value transactions requiring multiple approvals.
Multi-layered digital banking security with advanced authentication protocols and behind-the-scenes monitoring.

Beyond providing tools, we believe education and partnership are essential components of effective fraud prevention. Our team regularly updates customers on emerging fraud trends, provides employee training on recognizing suspicious activity, and develops customized security solutions based on your company’s unique needs.

When something doesn’t look right, we don’t leave you hanging. Our approach emphasizes human connection combined with technology, ensuring that protection doesn’t slow down your day-to-day operations while providing the responsive support you need when threats emerge.

Let’s Build Your Comprehensive Fraud Prevention Strategy

Fraud risk management requires more than isolated solutions. Your company needs a coordinated approach to address multiple threats simultaneously.

You should regularly evaluate the types of fraud risk in your specific industry and the unique vulnerabilities created by your business operations. This assessment should guide your selection of prevention and detection tools, while also identifying areas where additional controls or employee training may be beneficial.

Remember that effective fraud risk management programs are not one-time projects, but an ongoing commitment to protecting your business, employees, and customers. As criminals develop new schemes and your business changes, your fraud prevention strategies must adapt accordingly.

Texas Gulf Bank is ready to deliver comprehensive fraud prevention support to address both current and future needs. We will provide ongoing guidance, keep you updated on emerging threats, and offer timely support when suspicious activity is detected.

Let’s take some time to assess your current fraud prevention measures and identify areas where additional security might be beneficial. Together, we may be able to strengthen your security posture and prevent losses. Contact our local team today to get started!

Services offered through the Treasury Services Department are fee-based and subject to approval.