Scammers Target Payroll Services, Too! Here’s How We Fight Back for Our Clients.

As a small business owner, you’re constantly on the lookout for payroll scams aimed at your company and employees. But what happens when scammers aim for your payroll provider instead?

If your payroll service isn’t vigilant, they will suffer… or, worse yet, others (like you) will pay the price. Once your data or money is gone, it’s gone. That’s why you need to pick a service that knows their stuff.

At CSI Accounting & Payroll, we’ve worked with small businesses for nearly 60 years, and we’ve never fallen victim to a payroll scam because we know what to look for. Here, I’ll answer:

• Which payroll scams do providers see?
• What are the red flags that providers should watch for?
• How does CSI avoid getting scammed?

Scams Aimed at Payroll Providers

Fraudsters contact your payroll provider by pretending to be a business that needs their services. Many providers front payroll funds and get reimbursed from their client afterwards, but that’s where the catch is if it’s a scam. 

There are two ways this can go:

• Scamming another business via wire fraud.
• Scamming the provider directly.

Scamming Another Business (Wire Fraud)

Sometimes, fraudsters impersonate a real business owner. (It could even be you!) They have a shocking amount of information, including banking details. If a payroll service isn’t doing their due diligence, they can pull money out of an unsuspecting business’s bank account. They’ve just been tricked into wire fraud.

It is nearly impossible to recover any stolen funds if this happens to you. Plus, just like most scams, the provider is not legally required to reimburse you for their mistake. That’s why you need to work with one that focuses on prevention.

Scamming Your Payroll Provider

It’s a little more common for fraudsters to use a fake, empty bank account. After fronting payroll funds, a service will try to pull the reimbursement from this bank account, only to find there’s no money. Nothing is traceable, and the fraudsters and money are long gone. The payroll provider has been tricked into putting their own money right into fraudsters’ pockets. 

If this is a big enough loss, they can go out of business, leaving clients scrambling for a new provider before their next pay date. This doesn’t need to happen to you. Choose a provider that avoids this scam.

Red Flags That Providers Should Watch For

(To avoid tipping off fraudsters, I’m going to talk about red flags vaguely.) 

Make sure your payroll service asks themselves these questions when talking to prospective clients:

• “Is this business open? Is the owner alive?”
• “Are they giving their personal contact information instead of the company’s?”
• “Is this business located where most of my other clients are located?”
• “Does this sound too good to be true? Do they not push back on anything?”
• “Does this feel more rushed than usual?”

At CSI, our consultants are our first line of defense. They proactively verify information from inbound leads, focusing on fraud prevention. This is part of how we’ve never fallen for a payroll scam.

How CSI Avoids Getting Scammed

To steer clear of payroll scams, make sure your payroll provider follows our advice:

• Do some research to ensure the provided details match what’s online. If they don’t align, contact the real company to verify it’s really them. If it’s not them, it can help the real company put up extra safety measures ahead of time.
• If something feels weird, go with your gut. A little bit of lost revenue is worth keeping you and your clients’ money and data safe.
• Charge a setup fee. Scammers rarely have a balance to pay it with, so this scares them away.
• Do a penny verification test. Deposit 1-99 cents into their bank account and have them tell you how much it was. If they’re incorrect, it proves they cannot access the account. Plus, if it can’t be deposited, then you know the banking information is wrong.
• Be ready for back-to-back scams. If you notice one attempted scam, put your guard up for the next several inbound leads. Scams come in waves.

At CSI, we do all of the above. If your provider doesn’t do these things, it’s time to consider switching.

Hire a Service That Avoids Scams!

Payroll scams have become more convincing over time. To keep your money safe, keep your data protected, and keep your service uninterrupted, make sure you only partner with a provider that won’t get scammed. 

Now that you know about payroll scams for providers, the red flags that providers should watch for, and how CSI avoids getting scammed, are you ready to check out our payroll services?

To see if we can be a good fit for your business, click the button below for a free consultation: