Many businesses support their communities by donating to local charities. While there are many 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 they secure donations is by creating entities resembling 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 fake branding in emails and on social media platforms. Not only do they hope you will 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 are 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.

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 did not provide endorsements — or they might have been conned into lending their support. Artificial intelligence can be used to impersonate the voice and appearance 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 someone 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 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 are 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 use 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, educate employees about charitable scams and how to respond to unsolicited calls, texts, and emails. Employees should feel empowered to ignore and delete messages if they suspect fraud.

Importance of Philanthropy

Many businesses donate to community charities to demonstrate their commitment to helping others. While there is 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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Our firm provides the information in this article for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisors. Before making any decision or taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this blog are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability and fitness for a particular purpose.




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