Businesses too busy to spot fraud?

Fraud expert, Equifax, is warning that the proprietors of small and medium sized businesses may be so focused on day to day survival that they could miss other threats to their future. As National Identity Fraud Prevention Week, aims to raise awareness of the risks of ID fraud to businesses and individuals, the dedicated Commercial Fraud team at Equifax has seen an increasing prevalence of frauds being committed against small and medium sized businesses.

“We wonder whether this is one of the consequences of the recession” commented Neil Munroe, External Affairs Director, Equifax. “The owners and managers of these businesses, already under increased financial pressure, have limited time to ensure they aren’t falling foul of clever fraudsters. But unfortunately, the fraudsters know this and are making the most of the opportunity. And that’s why it’s crucial for National Identity Fraud Prevention Week to continue to raise awareness of the risks so that businesses and individuals do all they can to protect themselves.”

According to a recent survey of UK small businesses conducted by Equifax, there are also some worrying trends in business owners’ perceptions of the fraud risks that might threaten their organisation, with limited precautions being taken as a result. Equifax has, therefore, published a new version of its Corporate Identity Fraud Guide to help businesses understand the risks and put in place the right preventative measures.

“Whilst there seems to be a pretty good awareness of the financial fraud that might affect a business, there seems to be a real lack of awareness of the risks of online fraud and company identity fraud”, continued Munroe. “Yet these are both relatively easy frauds to perpetrate and the ones that probably need the greatest level of monitoring to protect a business.”

Equifax asked respondents to its survey to rate the forms of fraud and identity fraud that they thought would be of most threat to their business, scoring from 1-10 for least to greatest risk. Company identity fraud came in at 4.5, followed by deliberate bad debt, where companies have opened accounts with no intention of paying, at 4.62 and online banking fraud at 4.75.

Interestingly, what are considered to be slightly more sophisticated frauds seemed to be rated higher by business people. Long firm fraud, where a fraudulent business is set up to defraud legitimate businesses was rated at 5.14 and phoenix fraud at 6.36. It could be that businesses perceive these types of fraud to be more financially damaging. But does that mean they are missing the frauds that are easier to perpetrate?

When businesses were asked what precautions they take to protect themselves from the variety of frauds that can affect their future stability, regular checking of bank statements and shredding of financial documents both came top of the list at 93% each. These were followed by credit checking of all new customers at 87%. However, only 50% of respondents regularly check their own business credit report which again seems to illustrate a lack of awareness of corporate ID fraud.

Company hijacking – or corporate ID fraud – is where fraudulent documents purporting to change the company officers and/or registered office details are filed at Companies House without the knowledge of the genuine company owners with a view to obtaining goods on credit with no intention of paying for them. This can be particularly damaging to the credit status of the genuine company, which is especially worrying in the current climate where access to business funding is already limited. And this is one of the most common types of fraud being seen by Equifax’s Commercial Fraud team.

The Equifax Commercial Fraud team regularly interrogates the company’s commercial databases for unusual access patterns on particular company business credit reports that are out of keeping with previous access patterns and could, therefore, indicate incidences of corporate ID fraud. And they work closely with Operation Sterling, an economic crime strategy team set up by The Metropolitan Police Service which is working in partnership with Companies House to combat fraud targeted at British businesses.

“Vigilance is key to protect against all forms of fraud affecting businesses, and not just vigilance of customers but an organisation’s own company data at Companies House,” concluded Munroe.

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