Board Insight

Fraud – the new crime pandemic – By Tim Jones

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The rise of business crime has been an increasingly serious issue over a number of years for all types of companies large and small. In the last two years, however, fraud has become the biggest type of crime in the country.  Businesses, on a daily basis, are having to combat the problems of sophisticated cyber crime fraudsters. This whole problem has been accelerated due to the increase in online trading and e-commerce during the Covid outbreak. We now all effectively live in an online world.

UK fraud jumped dramatically in 2023 with an estimate that total losses are in excess of a staggering £2.3 billion. This represents an increase of 104% on the figures in 2022. Behind these figures there is a breakdown which includes corruption which has seen one of the largest increases in the last 12 months and now represent 26% of the total.  Behind this is tax fraud which represents around 23% of the total.

What, however, is most alarming and is seemingly unstoppable is the rise in cybercrime. There are very few businesses which are not affected by this. It is now a daily task to ensure that companies have adequate protections in place. Many regard this as a losing battle as the ease of accessing bank accounts increases, under attack from the sophisticated levels of artificial intelligence now available and the latest fraud enabling technologies which provide fresh opportunity for fraudsters.

Despite these staggering rises, it is still the case that only one in seven fraud offences are being reported to the police. This is increasingly worrying as it is likely that the true figures of criminal activity today are probably far larger than is officially recognised. The reason for this is generally a concern about the reputation of the business and fears of losing the goodwill of customers.

So is there a “thin red line” defending us from this increasing and pernicious trend?

Sadly not one that is winning the battle. Online scams between 2022 and today are now being described as an “epidemic” by UK Banks. They are seeing huge spikes in fraudulent authorised push payments. Transactions technology continues to be a big battle ground. Banks are reporting that in 2023 more than 70% of all scams are now happening on social media, online marketplace and dating apps.

Internationally the same problems are occurring. The United Nations, in a recently published report, disclosed that fraud factories are generating billions of dollars of revenue worldwide for criminals. They also report huge rises in synthetic identity fraud which is now the fastest growing financial crime in the US.

Even some of our most well equipped and tech-enabled businesses are vulnerable to attack. Cyber criminals, some of whom are individuals and some part of rogue-state sponsored networks are continuously harnessing new technology to make online fraud execution easier and attacks more difficult to identify and combat.

In a very recent regional survey, it has been revealed that CyberSecurity is now the greatest potential disaster that most business leaders worry about. 50% of bosses are now rating this as one of their greatest business risks. This has dwarfed earlier risk plans which would have included an unexpected economic crash or changes in government tax policy.

So back to that unanswered question – what can be done?

As already mentioned, it is proving very difficult to organise a coordinated response either at a local or national level. The government has introduced an “Online Fraud Charter“ which may be the first step in the right direction. This is a voluntary agreement between the Government and the Technology Sector to reduce fraud on their platforms and services. The Police have set up a SW regional cybersecurity SWOT force. The banks are also part of the solution but policies vary as to how much of a refund might be secured. It is essential that early written notification of an occurrence is made as this will assist in securing repayment.

These will not, however, work unless businesses adopt an DIY culture to increase their own security systems. Also that they adopt an open and honest security culture that encourages reporting cybercrime concerns without fear of reprisal. This needs to be backed up by good staff training, increased awareness and education, all of which help to protect individuals and businesses against attack. Sadly there is still a culture of fear as to the consequences and therefore unwillingness to put their head above the parapet.

Other simple steps can help.
• It is necessary to be constantly vigilant and sceptical as fraud can come from almost anywhere including staff members, customers, suppliers or third parties unconnected to the business.
• Everything needs to be treated with great caution. If a deal sounds too good to be true then it probably is.
• Throughly question all deals opportunities, documents and transactions before concluding them.
• It is necessary to know your business inside out, how it operates, the staff that you employ, the products and services you provide and your annual target market. If a close eye is kept on these areas, you should more quickly recognise when something isn’t right • It is also important to know your customers and suppliers. Invariably you can then, more quickly, spot something that looks wrong.
• Opening new accounts requires greater due diligence before financial engagements are entered into.
• It is also important to develop a specific plan to prevent fraud and talk about this with your staff  Also with your suppliers and main contacts to assist protection.
• It is essential to make sure that your systems are backed up in case they go wrong.
• Being diligent about your own business finances is also crucially important, such as understanding how money leaves your business including the methods of payment, who has authority to make those payments and who checks the payments are legitimate. Always checking your bank statement is important.
• Finally secure your property and equipment, including laptops, computers and smart phones – even down to checking that systems are closed down at night and that those working remotely strictly follow these procedures. In truth how many of us properly protect and change our passwords codes?

This is a challenge we must all work to live with. Let’s make sure that the spirit of collective problem-sharing, for which Northern Devon is famous, extends to this major threat.