Charity Scams: A Small Business Perspective

Many businesses support their communities by donating to local charities. Although there are plenty of nonprofits that deserve your support, some exist solely to facilitate fraud. How can you avoid the latter? Familiarize yourself with the deceptive tactics scammers use and carefully screen charities for legitimacy — before you write a check.

Branding tricks

Fraud perpetrators employ many tried-and-tested approaches to trick businesses into donating to fake charities. One of the most effective ways that they secure donations is by creating entities that resemble established nonprofits. They use familiar-sounding names and familiar-looking logos. They also make their websites and marketing materials appear like those of the charities they’re impersonating.

These scammers often use their fake branding in emails and on social media platforms. Not only do they hope you’ll donate money, but many also try to lure potential victims into clicking on links that download malware. The fraudsters might use the malware to hack networks, steal data and commit identity theft.

Tried-and-tested cons

Some other common methods used by con artists include:

Telemarketing scams. Using readily available technology, scammers can disguise their phone numbers to make it look like they’re calling from legitimate charities. During calls, they use high-pressure tactics that leave little time for would-be supporters to vet their organizations. This approach can be especially effective when a natural disaster occurs and potential donors understand the need to take quick action.

Fake endorsements. Some perpetrators use “endorsements” from celebrities, prominent companies and community leaders to lend fake charities an air of legitimacy and encourage you to donate. In most instances, the quoted individuals didn’t actually provide endorsements — or they might have been conned into lending their support. Artificial intelligence increasingly is being used by bad actors to impersonate the voices and appearances of well-known individuals.

False invoices. Most businesses receive a lot of invoices, and it may be easy to overlook an invoice for a charitable pledge you never made. To encourage prompt payment, an invoice from a fake charity might include a note referencing a previous conversation in which you or another person in your company approved the donation.

The real deal

There are a few simple steps you can take to help ensure your business’s charitable contributions go to real nonprofits. Most states require legitimate charities to register, and your state should have a website that will confirm whether a charity has filed and is in good standing. You can also enter a charity’s tax ID number on the IRS’s website to learn whether the organization is tax-exempt and if donations to it are eligible for deductions.

Keep in mind that a fake charity could potentially provide you with the tax ID number of a real charity. If you’re suspicious, further investigate the claims of the person soliciting donations. The websites of Charity Navigator, GuideStar and BBB Wise Giving Alliance can provide addresses, phone numbers, key performance metrics, tax and compliance information, and ratings relative to other nonprofits.

To help ensure you’re using best practices to avoid fraud, write and circulate a charitable donation policy. Your policy should describe processes to verify a nonprofit’s legitimacy and authorize donations in your company’s name. And it should specify approved payment methods and include instructions on tracking and reporting all charitable contributions. Also, make sure you educate employees about charitable scams and how to respond to unsolicited calls, texts and emails. If they’re in doubt, employees should feel empowered to ignore and delete messages.

Importance of philanthropy

Many businesses donate to charities in their communities to demonstrate their commitment to helping others. While there’s no shortage of worthy charities with important missions, scammers often take advantage of philanthropic businesses. Putting in place a donation policy, vetting charities and ensuring employees know how to handle unsolicited requests can go a long way to ensuring your giving ends up in deserving hands.

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