SMEs are the most at risk, says Alan Norton, head of intelligence at Graydon UK – which specialises in credit risk management, credit control training and corporate fraud intelligence in Scotland and throughout the UK – who talks us through how we can prevent fraud.
Fraud is more common than ever and consumers and companies increasingly face potential attacks.
The frequency of fraud incidents has increased both in terms of the number of events but also in the amount of money it costs the victims.
Both large and small companies are equally subject to attack and the more we are aware of the common fraud tactics, the more effectively we can protect our business interests.
Frequent news stories indicate that scam methods have become much more sophisticated.
From the investigation of 19 UK registered companies – believed to be part of a 20 billion dollar dirty money network – in October 2014, to the latest example of a 1 billion transfer from the three largest banks in Moldova to 20,000 limited partnership entities in the UK, we can conclude that corporate scams are not only widespread but also just at our doorstep.
But what types of fraud are most common?
Well, the most common type of fraud is application fraud, where scammers file dubious documents at Companies House, aiming to improve their credit rating and extend their line of credit. Protection of of the companies against this type of scam comes down to how well they know their customer and the amount of due diligence performed before entering into a contract.
The second type to look out for is impersonation fraud, the use of the identity of another person, real or fictitious in order to obtain goods. And last but not least, long firm fraud. Scammers set up a business, and develop a good reputation and payment behaviour, intending to commit fraud at a later stage. The risk of being a fraud victim is more prominent with small and medium sized companies, as they are the ones usually not investing in risk monitoring tools. But where it all comes down is the false economy principle, where saving money in the beginning will cost you more down the road.
So how can companies protect themselves?
Companies can choose between many solutions and decide whether in-house, outsourced solutions or a combination of both will be pursued. On one hand employee training is very important for detecting early signs of fraud. Raising employee awareness of the risk being a fraud victim and training on how to respond in the adverse case of being targeted can be face-saving and money-saving as well. Having clear internal processes and procedures will help toward that direction as well.
Furthermore a key tactic would be to share information about dishonest business partners with your network. This type of communication, as an integral component of your information flow within the supply chain, could save them from being in a dire position and also would work for you in a reciprocative manner.
On the other hand outsourced solutions can help companies capitalise on external data and analytics-based methods to detect and prevent risk. Automated processes can offer a consistent approach to risk management and help preventing fraud losses. As a result the generated intelligence can safeguard from potential future attacks.
10 steps to make sure you’re not the next corporate fraud victim
1. Keep in mind that Companies House stores public files, but does not have any investigatory authority
2. Verify the information supplied in the credit application form, using the company trade references
Be wary for Hotmail, Yahoo, Google email addresses and look out when non-geographical telephone numbers are used
4. Use Google Earth for addresses to make sure is not a virtual office
5. Check the VAT number, VIES website is one click away
6. Use the WHO IS website and find out when the particular website was registered
7. Beware of large orders being delivered to a residential addresses
8. Look out when there is high level of turnover and profits, especially if it is a new company
9. Take your time to be 100% sure that order is genuine
10. Seek out a trusted business partner to help you manage credit risk and prevent fraud