Businesses losing out to fraud and scams
The cost of business losses from fraud and scams reached £682m in 2018/19, according to figures from Action Fraud, with nearly 60,000 reported cases.
While larger businesses are more likely to be able to absorb the impact, smaller businesses are at far greater risk of serious financial implications.
Three types of fraud stand out from the Action Fraud figures:
- Employee Fraud - £213.7m
- Mandate Fraud - £99.3m
- Plastic Cards and online bank accounts - £98.1m
Employee fraud
The past few years have seen a considerable increase in reported losses from employee fraud. Examples include the misuse of corporate cards, claiming personal items as business expenses and claiming unworked overtime.
You can help to reduce your vulnerability to such abuses by encouraging an environment of loyalty to the firm, where whistle-blowers feel they are able to come forward in confidence without any fear of reprisals. In many cases, staff will have suspicions or evidence about a colleague’s fraudulent behaviour, but feel hesitant in raising concerns.
Payment frauds
Mandate fraud occurs when an employee is deceived into redirecting a regular payment mandate such as a direct debit, standing order or bank transfer) to a fraudster’s bank account. The regular nature of payments means that losses are likely to be higher than for one-off invoice fraud. The best defence is to verify requests for amended payments with the organisation or supplier in question directly using established contact details.
Plastic cards and online payments
There is considerable scope for fraud where debit/credit cards are lost or stolen, if card details are cloned or if online banking details are compromised.
Even the fast vanishing cheque can still be used in a scam – where a business receives a cheque for too much money and is asked to return the balance electronically.
Labour supply chains
At its most basic, labour supply chain fraud occurs when a business transfers staff and payroll responsibility to a fraudulent payroll company. The fake company will then not pay over the payroll deductions to HMRC. The typical target is a financially struggling business tempted by the opportunity to cut payroll costs.
More sophisticated schemes can involve fraudulent payroll companies, co-employment of a workforce and the use of umbrella companies. If you need help securing your business from fraud, we can point you in the right direction.
