This article covers how to recognise corporate fraud, plus covering some initial steps for fraud prevention. Corporate fraudsters often pose as legitimate customers, suppliers, or third party business relations. After all, why wouldn’t they? Wearing a mask of legitimacy is still proving to be one of the most effective ways of turning businesses into corporate fraud victims. As a result, managing the risk of corporate fraud requires continuous monitoring to stop a loss of funds, a damaged reputation, or even business failure.
Recent analysis from Graydon shows that one in every 635 companies show signs of fraudulent behaviour, which equates to circa 4,200 companies in the UK. In Central London, one out of every 343 companies displays fraudulent behaviour. So in a world where fraudsters’ methods of execution are gaining complexity, how can businesses spot the potential dangers of corporate fraud?
An unusual number of documented changes in a short time frame should be considered warning signs. The best time to pick these up is at the credit application stage. These changes could include:
Corporate Fraudsters have developed a variety of inventive methods to scam businesses: How to avoid invoicing scams
Assessing, managing and preventing the risks of corporate fraud is ultimately the responsibility of each organisation. Companies should make sure they are getting all the information they need to carry out their own risk assessment. Corporate fraud should be an issue for the whole business.
Preventing the threat of corporate fraud comes down to knowing your customers, suppliers and all third parties. Fighting corporate fraud is the responsibility of your whole organisation: With corporate fraud costing UK SMEs billions, how are you fighting back? Head of Intelligence at Graydon UK, Alan Norton points out:
“It’s down to each company to protect their own interests. Due to the scale of corporate fraud, the authorities do not have the resource to deal with it on your behalf. Don’t just train your organisation, but all third parties you work with. Know your business partners.”
Some key steps to avoid becoming a victim of fraud include:
The main functions of Companies House are to incorporate and dissolve limited companies; store company information delivered under the Companies Act; and make this information available to the public. This function does not include validating or verifying information stored within the registry. So for people whose business is scamming companies, they could use it as a repository for potential targets.
It’s also important to build a community of awareness, as well as a circle of protection among your industry contacts.
“If you become aware of suspicious activity, please make people aware within your industry. You may be the beneficiary of the same information later down the line,” says Alan Norton
You can also report corporate fraud directly: How to report business fraud in the UK