What is business fraud and how can it be prevented?

According to the Office for National Statistics, there were around 5.8 million instances of fraud and computer misuse in England and Wales in 2016. A large number of these fraud cases consist of business fraud. Businesses should be aware that fraud occurs in both larger and smaller companies. 

Fraudsters often target smaller businesses because they are aware that they have fewer defence resources and are, therefore, likely to be more vulnerable. However, there are specific strategies businesses can put in place to prevent fraud. 

What is fraud?

The concept of fraud is relatively simple; it involves misrepresentation to generate a financial gain for the perpetrator. Fraud can occur online, over the phone or in several other ways. What is crucial to recognise is that fraud is often not perpetrated by strangers; it can just as easily come from staff, customers or suppliers. 

People intent on committing fraud will often use social engineering techniques to trick their targets into handing over cash or information. Many different methods and approaches may be used, so how can you guard against them and help to prevent your business from becoming a victim to fraud?

Fraud prevention

In the modern, digital world, it’s difficult to avoid being a target for fraudsters and cybercriminals, but here are some tips that will help you and your business avoid becoming a victim of fraud.

– Acknowledge feelings of scepticism

One approach to take is that if something seems to be too good to be true, then it probably is. Businesses need to develop an attitude of distrust towards any emails that seem unexpected, deals or opportunities offering significant discounts, and any transactions that don’t seem genuine.

– Knowledge is power

One of the best ways to avoid fraud is to understand your business. If you know how it operates, who your staff are, who your primary customers and suppliers are, what laws and regulations you have to abide by and who your target market is, you will be more likely to spot when something doesn’t seem quite right. Of course, as your business grows, this becomes harder, and you may have to rely upon others – such as trustworthy department heads.

– Due diligence

When dealing with a new supplier, it’s crucial to build trust with them, but do make sure that you perform some background checks. It’s relatively easy to do this online and remember the above advice about scepticism.

– Know the risks

The rise of the internet has made life easier for fraudsters. As a business, you need to understand the routes by which you are most exposed to attack. Email is one of the main ones, with phishing attacks attempting to steal passwords or trick you into making false payments. Make sure that your security software is up to date. 

– Don’t forget the real world

Not all attacks will be online. Remember that most attacks target the human element so you should look at providing training to allow staff to spot scams. Some attackers will use phone calls to try to dupe you or your employees, so you must be alert to the potential risks. Talking to your staff about the threat of fraud and the devastating effect it can have on businesses is essential.

Protect your finances

At the root of most fraud is the profit motive. If you are on top of your business’ finances, then you will be better able to spot when something isn’t right. A popular attack method is CEO fraud where a fake email supposedly from a senior executive is sent asking accounts staff to make an urgent payment. Make sure that you have robust mechanisms for authorising payments and checking their legitimacy and that your team will treat unexpected requests with suspicion.

Remember, if you open up a business account, always check what measures they have in place to help with detecting fraudulent activity.

Make a plan

No business wants to experience fraud, but it’s essential to have a plan to handle things should it happen. This will serve to limit losses and assist the authorities in tracking down the culprits. You can report attacks to the Action Fraud website where you’ll also find further advice on keeping your business secure.

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