Top Times for Fraud in the United States and Why Finance Professionals Should Be Aware

Identifying these high-risk periods is crucial for businesses to implement effective fraud prevention measures and safeguard against financial losses. In this article, we’ll discuss the top times when U.S. businesses are most susceptible to fraud and why you should keep an extra eye out during these periods.

Top Times for Fraud in the United States

Certain times of the year present heightened risks for fraud, particularly for accounts payable, accounting, and finance teams. These are the key periods when U.S. businesses are most vulnerable:

End of fiscal year

• Timing: Typically December 
• Risk factors: As the fiscal year comes to a close, accounting teams are under pressure to finalize financial statements, prepare tax reports, and close out accounts. This high volume of transactions and tight deadlines can lead to oversight lapses, providing fraudsters with opportunities to submit false invoices or manipulate financial data. Scammers know that businesses are overwhelmed and may try to capitalize on the chaos by slipping fraudulent transactions through the system.

Holiday season (Thanksgiving to New Year’s)

• Timing: November through early January 
• Risk factors: The holiday season in the U.S. is marked by employee absences and reduced operational capacity, creating ideal conditions for fraud. With many key staff members on vacation and temporary workers filling in, fraudsters can exploit gaps in oversight. This period also coincides with increased sales for many businesses, adding to the volume of transactions and making fraudulent activities harder to detect.

Tax filing deadlines

• Timing: March and April (for individuals and many businesses), quarterly estimated tax deadlines throughout the year 
• Risk factors: During tax season, businesses are focused on compiling and submitting financial data to the Internal Revenue Service (IRS). The emphasis on tax compliance can draw attention away from routine checks and balances, making it easier for fraud to go unnoticed. Scammers may take advantage of this period by submitting fake tax documents or making unauthorized changes to financial records.

Quarterly reporting deadlines

• Timing: March, June, September, December 
• Risk factors: As businesses prepare quarterly reports, there’s often a rush to meet regulatory and financial reporting requirements. This can lead to decreased attention to detail and increased vulnerability to fraud, such as fraudulent vendor payments or falsified financial entries. The stress of meeting deadlines allows fraudsters to take advantage of weakened internal controls.

Summer vacation period

• Timing: June through August 
• Risk factors: During the summer, many employees take time off, leading to staffing shortages and potential gaps in oversight. Temporary employees or junior staff may be less familiar with established procedures, and fraudsters may use this period to target businesses that are operating with reduced capacity. The lower staffing levels can cause delays in detecting and responding to fraudulent activities.

Why U.S. Businesses Should Be Aware of These Peak Times for Fraud

Being aware of these high-risk periods is crucial for businesses to protect themselves from fraud. Here are several reasons why vigilance is essential during these times:

1. Increased risk of financial loss. Fraudulent activities are more likely to occur when businesses are under pressure or have reduced staffing. Detecting fraud too late can result in significant financial losses, which can damage a company’s bottom line and strain resources needed for recovery.
2. Operational disruption. Fraud can disrupt your business operations, delaying payments, complicating supplier relationships, and creating challenges in reconciling accounts. These disruptions can lead to lost opportunities and strained relationships with clients and vendors, damaging the company’s reputation in the process.
3. Regulatory and compliance risks. Fraudulent activities can lead to regulatory breaches if they are not caught and addressed quickly. Failing to comply with regulations, such as those set by the IRS or the Securities and Exchange Commission (SEC), can result in costly penalties and legal issues. Awareness of fraud risks helps businesses stay compliant and avoid these pitfalls.
4. Reputational damage. If a company is publicly associated with fraud or financial mismanagement, its reputation can take a serious hit. This can lead to a loss of trust from customers, investors, and business partners, which in turn can hurt future business prospects and reduce sales.
5. Efficient resource allocation. Recognizing high-risk periods allows businesses to allocate resources more effectively. This can include increasing staff training, implementing additional verification steps, and investing in fraud detection tools when needed. By doing so, companies can better protect their financial systems and reduce vulnerabilities.
6. Proactive prevention. Awareness of peak fraud times helps companies implement preventive measures ahead of time. These could include implementing stronger internal controls, investing in fraud prevention technologies, conducting regular audits, and providing fraud awareness training to employees. By being prepared, businesses reduce the likelihood of fraud slipping through during busy or vulnerable periods.

Quick Tips to Protect Against Fraud

To effectively protect against fraud, U.S. businesses should adopt proactive measures tailored to their specific vulnerabilities. Here are some quick tips to enhance your fraud prevention efforts:

• Double-check transactions: Implement a two-step approval process for all payments and invoices.
• Train employees: Provide regular fraud prevention training and update staff on emerging threats.
• Monitor transactions: Use automated tools and conduct frequent audits to detect suspicious activity.
• Enhance internal controls: Regularly review and strengthen your internal controls.
• Increase vigilance during peak periods: Step up monitoring and security efforts during high-risk times.
• Secure data: Protect sensitive financial and customer data with encryption and access restrictions.

By anticipating vulnerabilities and reinforcing fraud prevention strategies, U.S. businesses can better protect themselves from the impact of fraud and ensure secure financial management throughout the year.

Summary

• The end of the fiscal year, tax season, quarterly reporting deadlines, the holiday season, and summer vacation are high-risk periods for fraud in the U.S.
• Fraudsters exploit operational gaps during busy times or staff absences, making businesses more vulnerable to fraudulent activities.
• Increased financial loss and regulatory risks can result from undetected fraud, which also harms business reputation and disrupts operations.
• Proactive measures, such as strengthening internal controls, increasing employee training, and conducting regular audits, help mitigate fraud risks during these periods.