As they look forward to a well-deserved break in the run up to the Christmas festivities, it is not unusual for small businesses to want to take their foot off the pedal slightly. However, criminals are working overtime to make the most of the increase in online activity. The threat of online fraud is rife and it is essential that companies do not let their guard down and continue to ensure safeguards are in place to protect their businesses.
Recent research from Accura, the insights business of VocaLink, has shown that one in four small businesses say that business related fraud is one of the biggest risks to their business, with 27 per cent having experienced invoice, mandate or CEO fraud directly.
Invoice fraud happens when a company is tricked into changing bank account payee details for a sizeable payment. Mandate fraud occurs when criminals trick businesses into changing payment details, such as standing orders and direct debits, in order to divert payments and CEO fraud involves impersonation of senior company officials, to coerce employees to transfer company money under the auspice of a legitimate business purpose.
When businesses have been victims of fraud, the result is often detrimental and is therefore a huge concern for the entrepreneurs. What’s more, this risk seems to increase over the winter months with Action Fraud reporting over 1,800 cases of mandate fraud alone in the last quarter of 2015, higher than any other point in the year.
Christmas period poses a risk
This may be when spending is at its highest in the run up to Christmas and business owners may let their guard down during the festive period.
Invoice re-direction is one type of fraud which can adversely impact businesses of all sizes. In cases of this type, fraudsters pretend to be an existing supplier and convince the company to change their details and make payments to a different bank account.
Millions of pounds are unwittingly handed over to fraudsters every year through this type of scam. In some cases, large sums of money are transferred several times before the crime is even discovered and unfortunately the funds are often never recovered. A company will still owe the ‘real’ supplier and as well as losing large sums of money, this can often result in business closures and job losses.
For small businesses, the lack of resources often makes it almost impossible to eliminate all types of fraud. In line with industry best practice, Accura, has set out below 5 top tips to help small businesses to mitigate the risk of invoice redirection fraud.
Raising awareness
Ensuring that staff members who are responsible for paying suppliers are both knowledgeable and cautious is key to the prevention of this type of fraud. All staff should be made aware of the existence of such fraud and they should be trained to recognise the potential warning signs.
For example, to scare employees into paying quickly, fraudsters may state on the invoice that the due date for the payment has passed, or threaten that non-payment will affect your credit rating, so employees should be instructed to check that the goods or service have been provided in every instance before payment is made. They should never be pressured into doing something quickly without being sure that the request is legitimate.
Establishing a best practice
Successful fraud of this type is often the result of an unreliable accounting system and therefore it is essential that a company establishes a ‘best practice’. If possible one supplier contact who is responsible for the payments should be identified and clearly noted on the supplier file.
This person should be contacted in all suspicious circumstances. Payment verification techniques such as three way matching either manually or automated can be hugely beneficial in the detection and/or prevention of fraud.
This refers to matching three documents – the invoice, the purchase order, and the receiving report All processes should be documented and readily available to staff members.
Contacting the supplier
Where changes to suppliers’ details are requested, extra checks and processes should be implemented. A supplier should always be contacted using the original contact details that are held on file. The payer should feel confident to contact the supplier should they have any cause for concern.
It can be useful to inform a supplier once any payment has been made and the account details to which the amount has been paid should be clearly communicated. Where larger or one off invoices are raised, a one to one meeting with the supplier may be beneficial.
Storing supplier information
It is common place for companies to publicise details of their suppliers on their website and in other public material. This provides invaluable ammunition for fraudsters who glean as much information as they can before posing as a supplier.
Companies are advised to consider whether such information adds value and where it is deemed unnecessary, such information should be removed.
Financial information
Bank statements should be checked regularly and any anomalies should be investigated and raised with the bank as soon as possible. As with all sensitive information, invoices and bank statements should not be left lying around. Every supplier invoice should be verified as in many cases when genuine and fake invoices are compared the discrepancies are immediately obvious.
For some companies, implementing the above simple steps goes far to minimise the risk of invoice redirection fraud. Unfortunately, the relentlessly innovative fraudsters are still winning the game and many companies are turning to their banks for assistance.
One major UK bank is using innovative technology, via Accura, that alerts the bank to possible cases of fraud before the funds have left an account hence allowing the bank to liaise with its customers to either validate or halt the payment. It is hoped that solutions such as these will be hugely successful in the fight against fraud.
Jim Wadsworth is managing director at Accura.
Further reading on scams
