Retailers, pet groomers and web designers are frequent targets for scams, an academic says, after the competition watchdog revealed more than $85 million was lost in business scams last year.
The Australian Competition and Consumer Commission received 83,150 reports of scams from small businesses and consumers in 2011.
According to the ACCC’s annual scam report, Targeting Scams, this figure is almost double the number from the year before, and more than four times the number in 2009.
The report reveals more than $85 million in losses were reported as a result of scams last year, up 35%.
But ACCC deputy chair Michael Schaper says the number of scams is likely to be higher than reported because many victims are too embarrassed to come forward.
According to Dr Paull Weber, senior lecturer in entrepreneurship and small business at Curtin University in WA, as many as 50% of small businesses have fallen victim to scams.
Most lose only a few hundred dollars, but the losses can run into the tens of thousands of dollars.
Dr Weber is conducting a study with the ACCC on which businesses are affected by scams and why, but says preliminary results suggest those with high turnover are the most targeted.
He identifies cafés, pet groomers, financial advisers, travel agents, retailers, IT managers and web designers as frequent targets.
In 2011, the top five scam types reported to the ACCC were:
- Advance fee/upfront payment scams. There were more than 30,000 scams of this nature last year, accounting for 36.6% of the total number of scams.
With this type of scam, companies and consumers are offered the chance to earn money by processing mail or accounts, but are told they must pay an upfront free to cover costs.
- Computer hacking scams. There were more than 19,000 of these scams last year, representing 23.4% of the total number.
- Lottery and sweepstake scams (7,863 scams, or 9.5%).
- Banking and online account scams, including phishing (5,430 scams, or 6.5%).
- Online auction and shopping scams (5,012 scams, or 6%). According to the ACCC, small businesses increasingly fell victim to real estate scams in 2011.
Criminals lure their victims with attractive prices and legitimate-looking websites, and, according to Schaper, are “very adept at creating a sense of urgency”, so business owners are more inclined to make a hasty decision.
Then, after a business has paid a deposit and a couple of months’ rent without having inspected the property, they arrive to find it is already tenanted and unavailable.
The ACCC report reveals phone scams were the most popular scam delivery method in 2011, up from 14,144 in 2010 to a whopping 42,977, while email is also an increasing common method.
Internet scams have declined, but the numbers of scams via text and mail have increased. Scams done in person have also increased, while the number of fax scams has fallen considerably.
As part of this year’s National Consumer Fraud Week “Slam Scams!” campaign, the ACCC is encouraging small businesses to avoid any engagement with scammers.
According to the ACCC, engaging with scammers only makes businesses more likely to be a target in the future.