Managing Attorney
Your business may be more vulnerable to fraud than ever before. Fraud costs businesses, in particular small businesses, millions each year. According to the IBM Cost of Data Breach Report 2024, companies with less than 500 employees reported a 10% increase in data breaches from $3.31 million to $4.88 million. The alarming nature of these statistics makes it even more critical that businesses take precautionary measures to protect themselves from the different types of existing frauds and minimize their potential for future fraud attacks.
Working diligently to safeguard your business requires more than being vigilant, it will require consulting an experienced and dedicated Texas corporate attorney to help you protect your valuable assets.
Understanding the Different Examples of Business Fraud in Texas
Texas law defines fraud as a deliberate act of deception intended to secure an unfair or unlawful gain. The Texas Penal Code and the Texas Business and Commerce Code outline various forms of fraud and their legal implications. In Texas, some common types of fraud businesses face are:
- Cyber fraud
- Payroll fraud
- Insurance fraud
- Real estate fraud
- Securities fraud
Knowing these types of fraud and ways to mitigate them is essential to keeping your business safe in the long run.
Types of Fraud in Texas
- Common Law Fraud: Involves a false representation that is intended to induce the victim to act, leading to damage or loss.
- Statutory Fraud: Defined under specific statutes, such as the Texas Business and Commerce Code, which includes provisions against fraudulent business practices, real estate fraud, and securities fraud.
- Constructive Fraud: Occurs when a party gains an unfair advantage over another by deceitful or unfair means, even if there is no intent to deceive.
Exploring Cyber Fraud: Risks and Protection Strategies
Cyber fraud is the term used to describe the wide array of crimes by cyberattackers, or simply, crimes done via the internet. The extent of damage that cyber fraud can cause is vast. Cyber attacks can expose your clients’ sensitive information causing potential legal problems. Common examples of cyber fraud are:
- Phishing: These usually take the form of falsified emails containing legitimate-looking information including invoices, requests to reset passwords, or even internal correspondence.
- Malware: It is often used to steal personal information and create “backdoors” whereby criminals gain control of a computer, and access vital information within.
- Ransomware: Cyberattackers hijack the company’s information by encrypting it and holding it at a ransom to have it decrypted. Often, even after a payment is made, the information is not returned but held again for another ransom demand.
Even with these common types of cyber fraud, knowing how best to protect your business is essential. Key strategies businesses can take to protect against cyber fraud are:
- Education and training: Informed employees are more proactive employees. Regular training sessions can help to identify the signs of threats, especially those that can come via emails requesting sensitive information.
- Keep systems and software updated: Regular maintenance of software and operating systems, from antivirus to spyware protection, can help streamline this process.
- Strong access controls: Encourage the use of strong, unique passwords using password management software for all employees, enabling two-factor authentication, and also limiting user access to certain files are some effective methods.
Cyber fraud doesn’t have to ruin the reputation of your business if you take these proactive steps.
Payroll Fraud: How It Happens and How to Prevent It
Payroll fraud happens when an employee or employer is in the position of access to payroll distribution and manipulates the system to access funds they are not entitled to. Activities such as misclassifying workers, inflating hours or salaries, and even creating ghost employees, are categories of payroll fraud. One recent case involving payroll fraud within a Texas company saw an employee facing jail time for this serious offense.
To combat these practices, businesses should take these steps:
- Conduct regular audits
- Employ automated payroll systems
- Segregate payroll duties
Implementing these steps can safeguard your business from costly payroll fraud.
Insurance Fraud and its Impact on Business
In Texas, insurance fraud is a criminal offense. The Texas Penal Code § 35.02 covers fraud for all insurance transactions. A business being found guilty of committing insurance fraud runs the risk of increasing operational costs and overall jeopardizing the business’s reputation. Some common types of insurance fraud include:
- Property insurance fraud
- Workers’ compensation fraud
- Liability fraud
Ways of combating this type of fraud involve the implementation of rigorous verification processes and regular auditing of insurance claims.
Key Statutes
- Texas Penal Code Section 32.46: Addresses various forms of fraud, including credit card fraud, identity theft, and financial institution fraud.
- Texas Business and Commerce Code Section 27.01: Specifically covers fraud in real estate and stock transactions, detailing elements and remedies.
Legal Consequences
Fraud can be prosecuted both criminally and civilly in Texas. Criminal penalties can include fines, restitution, and imprisonment, depending on the severity of the offense. Civil penalties can involve compensatory and punitive damages awarded to the victim.
Need Expert Advice on Fraud Prevention? Reach Out to our Texas Corporate Attorney Today.
Fraud doesn’t have to destroy your business’s reputation or cost you millions in damages. Taking the necessary steps to secure your business on fraud prevention is as simple as reaching out to our experienced Texas corporate attorney. Contact us today for a consultation to discuss how fraud protection can help your business.
This is not intended to be legal advice. Please consult an attorney.