How to Check if a Company is Legit

It’s becoming increasingly difficult to tell the difference between a legitimate and a fake company. This is, in part, due to phishing scams, where fraudsters impersonate legitimate companies to fool their victims into making false payments or disclosing personal data. According to Statista, over 963,000 unique phishing sites were identified globally in Q1 2024. 

However, phishing is far from the only scam involving fake businesses. A 2023 investigation by the Bureau of Investigative Journalism and the Observer identified 168 UK companies involved in fraudulent cryptocurrency or foreign exchange schemes, with about half linked to pig-butchering scams. 

These disturbing trends underscore the importance of due diligence online, both for end users and for businesses. So let’s dive into the most common scams and how to check if a company is legit.

The most common types of business scams

The FTC advises that scammers often pose as legitimate entities to fool their victims. These impostor scams, or impersonation scams, involve clones of trusted entities, such as government agencies or well-known companies, which are used to deceive victims into providing money or personal information​. Impostor scams topped the list in terms of reported numbers, with total losses reaching $2.7 billion. 

To perpetrate these scams, fraudsters typically employ phishing techniques. This is when fraudsters reach out to their victims by email, text, or otherwise, providing a link to a fake website. Once the person clicks on that link, they’re redirected to a fake website that may look identical to a legitimate entity—say, a bank or government portal—where they’re prompted to enter sensitive information such as passwords, credit card numbers, banking PINs, etc.

Suggested read: What Is Social Engineering Fraud and Why Is It on the Rise in 2024?

What’s more, creating these clone websites is easier than ever, making it increasingly difficult for consumers to distinguish between a legitimate business and a scam. 

The most-commonly faked entities

According to the recent Better Business Bureau report, the US Postal Service was the most-impersonated organization reported to the BBB Scam Tracker in 2023, overtaking Amazon, which fell to second place.

The top-10 organizations used for impersonation scams according to the BBB:

1. US Postal Service
2. Amazon
3. Publishers Clearing House
4. Geek Squad
5. Norton
6. PayPal
7. Microsoft
8. Walmart
9. Facebook
10. McAfee.

Government impersonation scams

Scammers often impersonate government companies and agencies, from local police to federal entities and tax collectors. The goal is to pressure the target into sending money to resolve an ‘urgent issue’. This approach typically includes dire warnings or threats to create a sense of urgency.

Federal Trade Commission data reveals that consumers reported losing $76 million to government impersonation scammers via cash payments in 2023, a 90% increase from $40 million in 2022. Overall, losses to government impersonation scammers reached $618 million in 2023, up from $497 million in 2022 and $428 million in 2021.

Steps to verify a business

• Check registration and licensing. Start by visiting official government websites to verify the company’s registration. Look for a business license number or registration ID.
• Review contact information. Verify the business’s physical address and contact details. Call the phone number provided to ensure it’s active and answered professionally.
• Check online presence. Examine the business’s website for completeness. Look for a privacy policy, terms of service, and other signs of legitimacy.
• Read customer reviews. Search for reviews on independent platforms such as Google Reviews or the Better Business Bureau. Look for patterns in feedback to gauge reliability.
• Check social media and professional networks. Investigate the company’s presence on social media platforms and professional networks, such as LinkedIn. Active and engaging profiles can indicate a legitimate operation.
• Verify through industry associations. Many legitimate businesses are members of industry associations. Check for membership and endorsements from recognized organizations.
• Look for red flags. Don’t trust businesses that demand immediate payment, offer deals that seem too good to be true, or have poor grammar and spelling on their websites.
• Conduct a thorough background check. For larger transactions, consider conducting a more thorough background check through professional due diligence services which we’ve just discussed above.

By following these steps, consumers can significantly reduce the risk of falling victim to fraudulent businesses and ensure they are dealing with credible entities.

How to verify a business with Sumsub

Many industries must verify their business partners in accordance with AML compliance regulations, conducting a Know Your Business (KYB) procedure. These industries include finance, payments, crypto, gambling, and more.

While regulated businesses are required to conduct KYB, non-regulated businesses are highly recommended to do so, as it helps keep fraudsters away, avoid losses, and prevent reputational damage.

Sumsub works to understand the specific requirements of each business and offers a comprehensive, tailored KYB check that fully automates company verification and AML screening. This includes six unique modules that can be combined through our Workflow Builder:

• Corporate Registry Check
• Ownership and Control Check
• UBO Verification
• AML Screening
• Questionnaires 
• Corporate Documents Review

The client can choose how many modules they need and combine them as they like (only company name and country are mandatory for corporate registry checks). Clients can also add additional levels of verification and make them mandatory for users if needed.

Sumsub is the only 6-in-1 solution on the market. 

Learn the details Sumsub’s KYB verification in this detailed guide: Understanding KYB and How it Relates to KYC (2024)

FAQ

• How do I verify an online business?

  To verify an online business, you can check its registration and licensing details, read customer reviews, confirm its physical address and contact information, and use third-party verification services.

• How to check if a company is legally registered in the USA?

  To check if a company is legitimate in the USA, you can search for the company in the relevant state’s corporate registry or use online business verification services. You can also use the company search on the SEC website.

• How do I verify business ownership?

  To verify business ownership, you can request and review official documents, such as the Articles of Incorporation, operating agreements, and ownership certificates—or access public records from the relevant business registration authorities. You can also use professional services, such as Sumsub’s KYB verification.

• How do I verify a business license?

  To verify a business license, you can contact the issuing government authority or search the official online database provided by the licensing agency. Sumsub’s KYB verification is the easiest way to do it.