The bitter truth about fraud

Each and every business in the UK is a potential target for financial crime. No matter how you might attempt to sugar coat it – “We’re too small”, “We’re too large”, or even “We would never fall for that” – no business is ever completely immune to threats of financial crime like fraud.

Fraud constitutes a third of all crime in the UK, an obnoxiously high figure that continues to increase in size every year. The UK’s Office of National Statistics reported an increase in reported fraud cases of 12% last year, while a 2018 report by PWC stated that 50% of UK businesses had experienced fraud in the previous two years. Fraud is growing fast and there’s no sign of it slowing down.

It’s worth noting that 84% of the fraud cases reported in 2018 were cyber-enabled. As technology continues to evolve and proliferate at hyper speed, financial crime is an undesirable side effect. Technology acts as an enabler for more sophisticated illicit tactics and also provides a higher geographical reach for criminals. This means that today, businesses are more vulnerable to financial crime than ever before. And that means it’s more important than ever that businesses are proactive when it comes to fraud prevention.

How can you protect your business from fraud?

There are many actions you can take that help your business reduce the threat of fraud on your businesses. Two simple steps you can take to help your business retain revenue, secure your reputation and generally protect your business from becoming a victim of financial crime are:

1) Know your customer (KYC)

Avoid customer fraud by taking the necessary steps to ensure that electronic payments are legitimate. This might entail adding additional steps to ensure you can verify the identity of your customers and any potential risks.

Shopping on the internet makes card fraud easy for criminals because, simple security checks like PIN numbers, that are often taken for granted, are bypassed. If your business falls victim to remote purchase fraud, your business could lose both the goods and the purchase income. Make sure you’ve put in the necessary tools and techniques to profile and authenticate your customers.

For more advice around KYC and card fraud, visit Financial Fraud Action UK.

2) Know your supplier (KYS)

Mandate fraud was the type of fraud with the highest reported losses by the private sector in 2019. This particular method of fraud refers to the process of criminals obtaining account details, standing orders or direct debits and amending them to divert seemingly-legitimate transactions into alternate bank accounts. According to the BBC, the average loss per case was more than £28,000.

The risk of mandate fraud, invoice fraud and even irregular purchasing can be alleviated by “knowing your supplier”. By understanding the types of payments they make and ensuring you verify requests for account changes and flagging irregular payments can help to stop this from becoming a problem.

Irregular purchasing patterns include larger than usual orders, multiple purchases of the same item, a series of rapid orders/transactions from a new customer or a change in behaviour from a regular customer.

If you think that your business has fallen victim to fraud, ensure you report it to Action Fraud as soon as possible.