This is not my first article about Internet fraud, but it may be my most important. The example of fraud I am going to outline in this article wasn’t gathered from the Internet or the news, but from someone I know personally.
A dealership owned by a friend of mine sold $350,000 worth of vehicles to a business. Once the vehicles were received, the dealership was to email their account information in order to complete the wire transfer. The vehicles were received, and soon after, an email from the dealership was received containing the account information. As arranged, the business transferred all $350,000 to the account. As you might be expecting, the information in the email, even though it was from the dealership, was fraudulent and for an off-shore account. It was discovered, but not soon enough. The dealership had been hacked and the hacker sent the email from the dealership with their account information. The bottom line is that the dealership delivered the vehicles, the business paid for the vehicles, but the dealership never received their money. The dealership wants their money. The business says they paid. Both parties are going to court. No one wins.
You may think this will never happen to you, and that’s exactly what my friend thought. Nonetheless, it happens all the time and to all kinds of businesses. Funeral homes are no exception. It may not be for $350,000, but it could be enough to make a sizeable impact.
Many of you have been in business for years, if not decades. You may not think your business has changed, but it has. For me personally, it was a slow methodical change. Now I send and receive money over the Internet all the time. That was something I didn’t do 10 years ago.
As I researched this article, I contacted the Insurance Information Institute and asked them if loss from fraud was a covered matter. Their response proved informative and vital for anyone in business.
“Yes, this type of fraud can be covered by insurance. A hacker with the right knowledge and equipment can access a company’s bank account and steal significant sums of money. A company can also be exposed to theft by someone coming onto their premises, gaining access to a computer and using that computer to fraudulently transfer money or other property. That’s why it’s important to get the right type and amount of coverage.
"Computer fraud coverage is available to cover direct loss of money, securities and other property resulting from the use of any computer to fraudulently transfer insured property from inside the insured premises (i.e., dealership or funeral home) or bank premises to a person or place outside of the insured’s premises or bank premises. For example, an employee gains access to your computer system and changes the bank routing number to their bank routing number, resulting in the transfer of a large sum of money to the employee instead of to the vendor.
"There’s also what’s termed funds transfer fraud coverage, which can be purchased to cover direct loss of money and securities in the insured’s transfer account on deposit at a financial institution committed by a third party and directly cause by electronic, phone or fax instruction which claims to have been transmitted by the insured but was fraudulently transmitted by someone else without the insured’s knowledge or consent. It protects the company from fraud in which there was written instruction issued by the insured which is then forged or altered by someone else without the insured’s knowledge or consent, which claims to have been issued by the insured but was fraudulently issued without the insured’s knowledge or consent. It also covers electronic, telephone or fax instruction received by the insured which claims to have been transmitted by an employee, but was fraudulently transmitted by someone else without the insured’s or employees consent.
"Both coverages are available under a standard crime policy. Some insurance companies offer it as a combined coverage, while others write it as two distinctly separate coverages. Generally the cost is quite reasonable and should be included in a company’s insurance portfolio. The question is whether the dealership (which was the one that was hacked) had elected to purchase the coverage.”
–Loretta L. Worters, Vice President of Communications, Insurance Information Institute, 110 William Street, New York, NY 10038
If you haven’t reviewed your business insurance recently, I strongly suggest you do. I do not want to be writing a story about your business in a future article.