28/07/2014

By Alan Norton, Graydon UK


There has been a noticeable shift in commercial deceptive activity away from large companies towards small and medium size enterprises (SMEs). Here, in the first in a series of exclusive advice blogs, I take a look at the latest tactics being used by fraudsters targeting SMEs and the steps your business can take to minimise the risk.

Large corporations are not the only organisations that need to proactively mitigate the risk of fraud. Increasingly SMEs are being hit by deceptive activity that can have an extremely harmful effect on the health of their business.

Fraudsters will use company details for dishonest purposes. Do not fall into the trap of assuming that just because a company is registered at Companies House and has filed accounts that they - or the indeed the figures - are genuine.

Some of the more sophisticated fraudsters have been known to file false accounts in order to generate a credit rating. If you have concerns about a company’s financial statements, the first place to check is with the named company auditors, although there have been cases were auditor’s details have been high-jacked and used fraudulently.

Those whom are committing acts of fraud usually try to obtain certain types of products. The fraudsters are looking for non-bulky, high value items, which they can easily ‘sell on’ for cash. Businesses associated with these types of products should re-evaluate any unusual large orders they receive, particularly from a first time buyer, with whom they have no previous trading experience.

What steps can be taken to minimise the risk of fraud?

Know your customer

Compliance with UK anti-money laundering regulations requires you to identify the following details from anyone making a new business enquiry: full name, registration number and the names of all company directors.

This should serve as the first step of your fraud policy, but it is also a crucial practice for any organisation that offers credit terms to ensure a risk assessment of the buyer has taken place. This can be done by credit checking organisations that approach your business for a credit account. Credit Reference agencies, such as Graydon have invested in and developed complex analytical techniques which can help highlight unusual corporate activity.

It is essential that greater care be taken to check and reconfirm delivery addresses on all orders secured from an unfamiliar source. It is advisable to reject any sudden changes to delivery details and start the order process from scratch. It is also worth paying particular attention to any large orders made early in the month, as experienced fraudsters will act then to maximise the time before you chase for payment.

Share your experiences

When fraudulent activity occurs everyone loses. If you are aware of people operating with the intent to deceive, warn as many people as possible. Your professional network can help and by sharing information on the fraudsters you encounter will increase the chance that someone extends you the same favour, engaging in conversations about best practice involving fraud will help keep you abreast of safeguarding techniques and developments.

Protect your own business

Experience has shown many wrongly believed the police and law enforcement organisations such as the National Crime Agency (NCA) are there to help prevent and investigate commercial fraud. However, with the continued programme of government austerity measures, commercial fraud is no longer being treating as a priority and is often only dealt with in extreme cases, deemed to be in the public interest.

Therefore any trading company must take their own measures to ensure they do not become victims. A large enough fraud could cause your organisation to go out of business, which in turn may leave a supplier with a bad debt. The only answer to combat these perpetrators is to be vigilant and take preventative measures to protect your business.

Lastly, if your company has been the victim of fraudulent activity, immediately review your processes as once fraudsters have been successful, rest assured they will pay you another visit!


By Alan Norton, Graydon UK