Millennial entrepreneurs (i.e. those aged 18 – 35) are the most vulnerable to fraud attacks, with more than one third (35 per cent) of young business owners claiming to have been a victim of invoice, mandate or CEO fraud.
According to research from Accura, the insights business of VocaLink, this increases to 55 per cent for businesses with owners aged under 25, but is as low as 2 per cent for business owners aged over 45.
The research suggests that fraudsters are actively targeting inexperienced business owners with invoice-related scams, and are successfully duping them into paying money into a false bank account, instead of to a legitimate supplier.
The problem of business-related fraud is widespread, as a quarter (27 per cent) of SMEs say that fraudsters have attempted invoice, mandate or CEO fraud on their organisation. The issue appears to be heightened where the owner is aged under 25, with 58 per cent of them having had fraudsters try to pilfer money.
In the majority of cases (over 90 per cent) the fraud attacks are successful in conning the young business owner out of money. Where more experienced owners are running the business, the fraud attempt appears to have been stopped in most cases before any money was lost.
This may not be surprising when more than a third (34 per cent) of millennial business owners admit that their accounts team doesn’t have a process in place to double check account details when invoices are received.
Jim Wadsworth, managing director, Accura, says that he often hear about the elderly being the most vulnerable to fraud but in these instances it appears that younger business owners are being actively targeted by and falling victim to fraudsters.
He adds, ‘When new businesses are set up, owners are understandably focussed on the speed of growth but it is also critical that they ensure they take the time to protect their businesses from the outset. If they do not, the implications can be severe.’
The research also uncovers a lack of knowledge in relation to liability in the instances of these types of fraud. While only 15 per cent of business owners aged over 25 believe that the bank would be liable and cover their cost, half (53 per cent) of business owners under the age of 25 inaccurately believe banks would cover the cost.
Wadsworth continues, ‘What is concerning here is that many young business owners don’t realise the potential implications of falling victim to this type of fraud. Unfortunately, once money is lost to invoice, mandate and CEO fraud it is seldom recovered. Many businesses then find out that they have to cover the loss, as they still owe their legitimate supplier.’
Where invoice or mandate fraud attacks have occurred, nearly half of the businesses affected (45 per cent) say that the business either folded or lost thousands – and in some cases millions – of pounds. Three in ten (30 per cent) of the organisations impacted had to cut jobs or scale back the business as a direct result, and one third (33 per cent) recognise that they had to tighten up the invoice processes.
Wadsworth concludes, ‘It is understandable that SME owners struggle to stay on top of all aspects of their business but we are deeply concerned about these findings, especially in relation to younger entrepreneurs.
‘As well as benefitting from cutting-edge anti-fraud solutions like those being developed by Accura, there are simple steps that SME owners can take to help prevent invoice fraud and hopefully keep more small businesses in business. For example, make it policy that any change of bank account by a supplier is always validated by a channel other than email, preferably through two contacts.’