7 Types of B2B Fraud and How to Prevent Them

The ancient Roman philosopher Seneca once said, “There is no right way to do a wrong thing.” We agree – there isn’t a good way to commit a crime.

But the problem with that is criminals agree, too. In 2022, for example, 56% of US companies were targeted by at least one B2B fraud attempt. As technology improves, fraudsters are open to trying new methods and launching multiple attacks. Their methods might be different, but they all want the same thing: access to your cash flow, customers and reputation.

When you’re protecting your business from financial crimes, it would be so much easier if there was only one thing to lookout for. But things are never that easy, are they? Instead, criminals branch out into a seemingly endless number of crimes that your business can be hit with. When you think about B2B fraud, for example, you need to think about all the different ways a criminal might try and defraud your company. 

Think about it: fraud isn’t just about clicking on a shady link in an email anymore. Between cyber-attacks like account takeover fraud and money laundering like triangulation fraud, there are dozens of types of fraud you need to watch out for. It can start to feel impossible know what to expect from fraudsters lately.

So, how can you protect your business from fraud if there are so many different types of them? Well, let’s look at another famous quote for the answer: “Knowledge is power.” (That one was Francis Bacon, by the way). The more you know about the types of fraud your business could be hit with, the more prepared you are to deal with them. 

If you’ve felt like fraud is becoming more and more of a problem, you aren’t imagining things. Fraud is on the rise globally. In fact, the latest AFP Payments Fraud and Control Survey Report revealed that 65% of companies have battled B2B payment fraud in the last year. And the bigger the company, the riskier things get. For example, the AFP study found that 84% of businesses with revenues over $1 billion faced attempted or actual fraud in the last 12 months. 

You work to grow your business, but the more successful it becomes, the bigger the target for fraudsters. So, what gives? Why is fraud becoming so common?

“You’re always trying to stay one step ahead of the fraudsters,” says Bill James, Director of Enterprise Sales and Strategy for Creditsafe. “Unfortunately, as our capabilities and technology evolve, so does theirs. With things like AI, they can upload a script into a website and do a lot of damage very quickly.”

It can feel hopeless. How can you stay on the winning side of fraud when the attacks can come from so many places at once? But with the right technology and processes in place, you can finally have the upper hand. 

There are so many different ways fraudsters can take advantage of your company. It would be almost impossible to cover everything, but don’t worry. We’re not all doom and gloom over here. Instead, we’re going to let you know some of the most common types of B2B fraud and what your business can do to prevent them. 

Now, let’s get into it.

When you think of “hacking,” do you picture an anonymous figure in a hoodie surfing the dark web? While that might be the traditional image of a hacker, the rise of technology has made account takeovers much more commonplace. 

Take Snowflake, for example. In April 2024, the cloud services provider was hacked and consumer data from businesses like Ticketmaster and AT&T were exposed. Since Snowflake holds nearly 20% of the data-hosting market, an account takeover has potentially devastating consequences. The impacted businesses are still picking up the pieces, but we know that at least 165 companies and organizations were impacted. In fact, 560 million customer records were stolen from Ticketmaster alone. 

Account takeover fraud involves a person or group infiltrating an account or system in your business. They could access information through stolen passwords or security codes or phishing scams, for example. From there, the world is their oyster. They could change account information to divert payments to themselves, withdraw funds from your business accounts, or, in Snowflake’s case, use it as a stepping stone to gain access to other companies. 

One of the biggest concerns with this type of fraud is reputational damage. Think about it: a criminal has access to privileged and confidential information about your customers as well as your own business (i.e. business contracts, invoices, banking details, to name a few). That’s a lot of sensitive information for the taking. 

When suppliers and customers discover that your company isn’t as secure as they thought, they’ll be less likely to want to continue working with you in the future. Just look at Snowflake: their stock has plummeted by 35% in 2024. I mean, would you want to work with a data company that just exposed millions of customers to a data breach? That’s why you should make sure your protection processes are as tightly-locked as possible.

How to prevent it: One of the main ways fraudsters can access business accounts is through phishing scams. You know the old playbook: they send an email saying you’ve won the lottery and all you have to do is click a link to claim your prize. But phishing is an issue in the B2B world as well – and their scams are a lot more sophisticated these days. You could receive an email from a supplier asking you to verify an order you just placed. You click through to check it out and boom: suddenly fraudsters have access to your account.

When you speak to customers and suppliers – even ones you’ve spoken to dozens of times before – you need to be sure you’re speaking to the real deal. Whenever a customer or supplier approaches you, verifying their identity is key. We’re talking about the basics, like making sure their email is the same as what you have on file. But you should also think about an added layer of protection. Make sure your team is working from one secure source of information and has access to tools such as business credit reports that can help verify a person’s identity. 

We’ve already mentioned this, but it bears repeating. Different types of businesses are affected by different types of fraud. If your company is in manufacturing, for example, then you already know how important it is to keep a close eye on your supply chain. When you’re choosing to work with a new supplier, are you 100% sure that the supplier complies with all national labor laws and industry standards? 

Triangulation fraud can seem complicated, but it’s actually pretty straight forward. Let’s get into what triangulation fraud actually looks like:

• A fraudster will set up a fake shop online, selling products they don’t actually have.

• Once their trap is set, they wait for a company like yours to place an order. 

• They order those products from a legitimate shop using stolen card information and ship your order to you.

• The fraudulent company now has “clean” money from your purchase without having to spend anything themselves.

You might not see an immediate problem here – after all, your company ended up with the legit products in the end. But your supply chain was just compromised with fraud and money laundering. And since keeping your supply chain compliant is your company’s responsibility, you’ll be fined by regulating authorities. Our research study, The Murky Waters of Overseas Manufacturing, showed that 22% of businesses have no compliance procedures in place. That’s a huge mistake. If you’re caught out by this type of fraud, you can face massive fines and reputational damage.

Other examples of triangulation fraud can include stolen goods. In 2023, for example, dozens of retailers selling goods on Amazon were shut down when they were caught selling stolen goods from brands like Breville, Keurig and SharkNinja. The problem was that these businesses had no idea they were selling stolen goods.

How to prevent it: Situations like the Amazon fraud example can feel like horror stories. How do you prevent fraud when it’s so easy to disguise? The answer is – know what to look out for and put clear compliance procedures in place to spot the anomalies early.  

Running compliance and AML checks on every single one of your suppliers is the key to preventing triangulation fraud. To protect yourself even more, those checks should be a regular part of your compliance procedures. As our recent study found, more companies are being vigilant about compliance with 83% of businesses saying they run compliance checks on their international suppliers at least once a quarter. Before you start working with any new customer or supplier, doing a full check of their business credit report is one of the most important things you can do for your business. Their report should show their business history and confirm that they’re legit.

Patience is a virtue, but fraudsters aren’t exactly angels. In a long-term fraud scheme, a fraudulent business builds up trust over months or even years to defraud their target. They might generate fake sales using stolen credit cards, for example, so that you believe they’re a successful, legitimate business. They might even fulfill your orders at first so they can build up that trust first just so they can deceive you down the line. They’re playing the long game. 

How to prevent it: To protect yourself against long-term fraud schemes, it’s not enough to look closely at your suppliers. Since long-term fraud can set up realistic companies that may have good reputations or relationships, never assume a company is who they say they are. Always be cautious and use data to verify, verify, verify. Ask yourself certain questions. Who owns the company? Do they have any recent legal filings against them? Has there been any negative media stories about them being involved in fraud, corruption, bribery or other unethical practices? 

Fraudsters are great at hiding themselves behind shell companies and aliases. Every time you onboard a new customer or supplier, make sure you take a thorough look into who they are, where their money comes from and if they’ve been involved in corruption, fraud or bribery. 

Bet you saw this one coming, right? Short-term fraud is another type of fraud scheme, but these fraudsters are less patient. Instead of working on complex plans to gradually build up trust with you, a short-term fraud scheme is quick and pointed. 

A few examples of short-term fraud include:

• Fake trade references

• Phishing

• Counterfeiting

• Wire fraud

Short-term fraud could be part of a larger fraud network, or just an individual trying their luck. For example, “bust-out” fraud is a scheme where a fraudster creates as many short-term scams as they can. They might be using stolen credit cards, impersonating people, attempting invoice fraud or any number of other schemes. As soon as they’re found out, they abandon all of them and run off with the money they were able to gain from the bust-out. 

How to prevent it: The good news about short-term fraud is that setting up clear processes could help you stop it in its tracks. The goal here is to get to a point where short-term fraud can be quickly and easily spotted so that your team has more time to protect the business against more complex types of fraud. Automating your credit checks and onboarding processes will quickly weed out suspicious businesses. As soon as a new customer tries to apply for credit with you, for example, a decisioning software will give you an easy yes or no answer. If they’ve faked their trade references, or if their business gives off any red flags, they’ll be automatically denied.  

There are two different types of fake invoicing your business should be aware of. The first is pretty basic. Fraudsters send fake invoices to your business from a relevant industry and hope you’re so busy and disorganized that you pay it without checking. Thankfully, most finance teams are smart enough to catch onto these types of fraud without falling for them. 

The second type of fake invoicing could be trickier. That’s when a fraudster sends your company a fake invoice from a company you already do business with. If you aren’t careful about checking the details on your invoices, you could send money to the wrong place – and accidentally corrupt your supply chain with money laundering.

They could also intercept your real invoices to change information. Picture this: you’re planning on shipping a large order of construction materials. Before you ship the order, though, you get an email from someone who claims to be an employee of the supplier. They ask you to change the bank account where the payment will be sent. If you aren’t careful about checking requests like that are legitimate, you could literally deliver your money directly into a criminal’s hands.

How to prevent it: If you’re caught up in an invoicing fraud scheme, it could be too late to do much about the situation if you’ve already paid the fraudulent invoice. The key to preventing invoicing fraud is to spot it early. Keep careful records of your customers, including their bank account details. Every time a new invoice comes your way, make sure the payment or bank account details match perfectly from previous invoices or the master contract. Your team should be able to pull up accurate, up to date information about every single contract in your system. Fraudsters are always waiting to try their luck with companies who don’t track or monitor their portfolios properly.  

It should be practically impossible to slip through the cracks. First, make sure everyone in your company uses one source of data. Communication is key here: your sales team might know that you’ve never closed a deal with this business, but is your finance team on the same page? That single data source makes it easy for everyone to refer back to the same information when they make decisions about who to pay and when.

Remember trick or treating as a kid on Halloween? Some houses would leave a bowl out on their porch with a note that said take one, but there was always someone who would take more than they were owed.

Welcome to overbilling. In this fraud scheme, a vendor will pad an invoice by adding goods you never actually ordered, and they won’t deliver. Or they could hike up the price of the goods they do deliver by adding extra delivery fees or other bogus charges.

A major – not to mention devastating – example of overbilling fraud happened in the insurance industry. Doctors were rewarded with bonuses and bottles of champagne if they added extra diagnoses and tests to their patients’ profiles. The insurance companies were able to bill the hospital thousands of dollars more per patient than before.  

How to prevent it: Overbilling is another type of fraud that you need to spot well in advance. Every invoice you receive needs to be looked at as if it’s the first one your business has ever gotten. Compare the payment amount in the invoice with what you agreed in the master vendor contract.  

That contract should be your north star whenever you’re worried about fraud. At the contract stage with each vendor, clearly outline the scope of the work, the deliverables, payment terms and billing procedures. That way, if you suspect a vendor of overbilling, you’ll have everything you need to back yourself up.  

Speak to almost anyone and they can probably tell you a story about identity theft. Most of the time, the stories aren’t that exciting – someone saw an unexpected charge in their bank account and had the bank cancel the card. 

Unfortunately, business identity theft is also a possibility. And, just like personal identity theft, it can take many different forms. For example, a fraudster could replicate your company’s website perfectly, just slightly changing the URL using homoglyphs, or letters that look the same but are actually different. For example, if you were reading this blog on creditsɑfe.com instead of creditsafe.com, you’d be in danger of exposing your information to criminals. Using these website cloning schemes, fraudsters can accept orders – and payment information – from your customers.  

Fraudsters don’t just target your customers. Picture this: you get an email from one of your suppliers. The person emailing claims to be one of the directors of the company. How can you tell whether they’re telling the truth?

How to prevent it: Beyond obvious signs of a scam, like a “director” of a company asking for you to directly transfer funds to them, you need more information. Checking the ownership structure of the businesses you work with is key. If in doubt, look at their business credit report and verify that the vendor has a company registration and Tax ID number. To make sure that this scam isn’t an inside job, you can also cross-check the mailing address of the vendor against the mailing addresses of key employees.

You might know what to look out for when it comes to B2B fraud, but how often are you looking? When we surveyed finance managers in our study, AI’s Role in Business Risk, 37% told us they believed a lack of automation in their finance function creates more risk for their business.

They’re right. Automating credit decisions and compliance checks isn’t just a time-saver. Working from a single, accurate data source is a game-changer for protecting your company from risk.

“You’d be surprised at how many companies either don’t use the right system or are inefficient with their system,” says Nileema Ali, Senior Product Manager at Creditsafe. “Often, they’re using multiple products to sort out a particular issue with fraud or compliance when they could be using just one. It creates an operational burden: if you have five different systems, you could have five different people doing different things on each of them.”

And with all of those people working across platforms, gaps can form. A decision that the sales department is fine with, for example, could be a risk to the finance department. 40% of businesses surveyed in our study AI’s Role in Business Risk said they only automate the Know Your Company/ID verification process “sometimes or rarely” and an additional 45% never automating AML and compliance checks. That’s a lot of gaps and a lot of potential risks for your company. 

“Companies are starting to use risk technology really well,” Ali adds. But the companies using it most effectively are the ones who understand exactly what they need from it.

Think about your own company. Do you work with a lot of overseas suppliers? Then you need to be on top of compliance and supplier due diligence. If your business takes frequent customer payments, invoicing fraud could be a bigger problem for you.