Fraud Prevention – 4 Steps to Protect Your Business

Fraud is increasingly prevalent, and businesses of all sizes need to take steps to protect themselves, says FPM’s Eimer McMillen. 

Online and offline, businesses and consumers are increasingly at risk of fraud. Unfortunately, not all crimes are reported which makes it difficult to obtain an accurate picture of the overall prevalence of fraud-related losses, however data from a variety of sources point to a concerning trend:

• In Northern Ireland, the PSNI received 8,629 reports of frauds or scams last year.
• According to the Consumer Council, just under half of NI adults (46%) have been targeted by a scam in the past three years.
• In September, the Office for National Statistics (ONS) reported that 4.5 million fraud offences occurred in the 12-month period ended 31 March 2022, a 25% increase on figures from two years
• In the Republic of Ireland, the CSO recently reported that fraud crime, largely driven by unauthorised transactions and attempts to obtain personal or banking information online or by phone, nearly doubled to 17,354 incidents in the year to the end of March 2022.

What is driving the increase in fraud-related crime?

According to a new report from the Chartered Institute of Internal Auditors, a ‘myriad of business-critical risks’ is increasing both the temptations and opportunities to commit fraud. These risks, which include supply chain disruption, cyber threats and staff retention challenges, are compounded by the impact of inflation, cost pressures on business owners and individuals, and the widespread shift to online operations during the Covid-19 pandemic.

Against this backdrop, it is critically important for business owners to take steps to protect themselves from the risk of financial loss due to fraud.

What are the main types of fraud?

Fraud can take many forms. Currently, the most common types of fraud that FPM encounter include cybercrime, phishing, identity theft, accounting fraud and asset misappropriation. Whilst prompt fraud detection can help to minimise losses, a fraud deterrence strategy which prevents scams in the first instance is preferable. This strategy should include the four key elements set out below.

4 steps to protect your business from fraud

STEP 1. Secure all data

Safeguarding all IT systems using robust firewalls and password protection is essential. Two-factor authentication adds an additional layer of security. Ensure that staff change passwords regularly and that there is a system in place for reporting suspicious emails.

STEP 2. Enforce strict data sharing protocols.

Staff should be trained to ensure that share sensitive information is never shared over the phone, in a text or in email. CEO impersonation fraud is on the rise and staff need to be alert to unusual requests from senior executives for urgent. Another common type of fraud is where criminals pose as bank representatives to “warn you” of a potential breach. They indicate that they are helping you, when in actual fact they are obtaining your private information to defraud you. If you receive a call from someone claiming to be from your bank and wish to verify this, you should call the bank yourself using the phone number on the back of your debit or credit card. A legitimate caller will be understand why you need to do this.

STEP 3. Scrutinise supplier invoices

Invoice redirection fraud attempts to intercept invoices or create a legitimate looking invoice to direct payment the attacker’s account. Businesses should ensure they have processes in place to verify the legitimacy of any request to update details, especially bank and finance details. In addition, the ability to update finance and banking details should be restricted to authorised personnel only.

STEP 4. Enforce a strong internal control environment

Unfortunately, in addition to external fraud and scams, internal fraud is also on the increase. Steps that can help to reduce the risks include segregation of duties, implementation of a strong control environment and a robust whistleblowing policy. Forging an open, anti-fraud culture where employees feel able to raise concerns is crucial.

Awareness and open dialogue

Scammers and fraudsters are relentless in their quest to steal which is why it’s so important to encourage conversation among friends, family and loved ones about how to spot and stop scams. FPM are proud to sponsor the Northern Ireland Fraud Forum, a newly established organisation set up to support an open, anti-fraud culture promoting better understanding of fraud-related risks and encouraging adoption of best practices for fighting fraud.

Pictured above (LtoR) Matthew Howse and Laura Dunseath from Eversheds and Sutherlands, Emma Luxton from Serious Fraud Office, NI Fraud Forum Chairman Bill McCluggage, NI Fraud Forum Board Members Thomas McKenna and Sinead O’Neill, Eimer McMillen FPM.