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Fraud is big business. It is estimated that all types of fraud cost UK business £150 Billion per annum, with 27% of SME’s having experienced attempted invoice, mandate or CEO fraud directly.

Invoice fraud is 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 for a perceived legitimate business purpose.

How can businesses minimise the risk of falling foul to such fraudulent activities?

1. 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.

2. Establishing 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 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, can be hugely beneficial in the detection or prevention of fraud.  This involves matching three documents – the invoice, the purchase order, and the proof of delivery.

3. Contacting the supplier

Where changes to suppliers’ details are requested by any “supplier”, extra checks and processes should be implemented. When notification of such a change is received, a supplier should always be contacted using the original contact details that are held on file, to verify the legitimacy of the request.

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 involved, a one to one meeting with the supplier may be beneficial.

4. 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.

5. Financial information

Bank statements should be checked regularly and any anomalies should be investigated 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 any further advice, please don't hesitate to contact me.