British Businesses Think Financial Fraudsters are Ahead of the Game

Our annual Business Fraud Report makes for sobering reading for UK businesses and those working in the financial sector.

One in five (22%) UK businesses now report that someone has previously attempted payments fraud on their business, and almost four in ten (37%) business owners who have either been a victim of payment fraud, or know a business who has been, report that thousands of pounds were lost as a result. The reality of financial fraud is certainly a significant issue for British business. In 2018, a total of £1.2 billion was lost due to authorised and unauthorised fraud according to UK Finance, with £93 million of this lost to business payment fraud. Therefore, it’s no surprise that the report reveals a staggering 73% of bosses and entrepreneurs believe that fraudsters who carry out payments fraud are now ahead of the industry. 

For companies large and small unlucky enough to have experienced some form of financial fraud, it can have a devastating impact. This year, the Business Fraud Report was extended to identify the full effects of fraud on the victims themselves. Alarmingly, it showed that one in ten who were victims (10%) contemplated closing their business; even sadder, 12% of UK bosses and entrepreneurs who had to deal with the fall-out cited problems with their relationships with family and friends as a direct result.   

Yet despite these findings, and some very public stories over the past few years, the research shows that many businesses still lack internal systems to deal with payments related fraud. Only 32% of UK businesses have tightened their processes to deal with payments fraud and nearly one in five (17%) say their accounts team don’t have any processes in place at all. This lack of action may be in part due to continued low awareness of the types of scams fraudsters use.

Payments fraud can come in many guises such as invoice and mandate fraud, as well as CEO fraud which is when a fraudster poses as a senior decision-maker within the business and emails employees to pressure them into transferring money to a particular account. Unfortunately, a quarter (26%) of UK businesses are still unaware of these types of scams, with half (53%) saying the biggest barrier to protecting their business against fraud is not knowing enough about how fraudsters are able to attack. This is despite the industry coming together to fund initiatives such as Take 5, which encourages people to stop and think before transferring money – particularly in instances where you receive an email from your CEO or some other senior member of staff asking you make an urgent payment outside of normal procedures, or if a supplier asks for their bank account details to be changed.

What’s clear is that business leaders are calling for support; 82% want the banks and government to do more to protect the business community. Reassuringly the industry is already working hard alongside the government and regulators to invest in new technology to stop business payment fraud in its tracks. Banks are starting to gain ground and get ahead of the fraudsters with additional new data-driven technology solutions such as those provided by Vocalink Services. ’ By flagging suspected fraudulent transactions for businesses early on by applying advanced analytics and behavioural rules to payments data, our business payment fraud solutions can help banks to investigate risky transactions early on. In fact, live with NatWest, it helped to prevent £7 million in losses in just the first 12 months.

However, our business payment fraud solution is not the only fraud-fighting tool to have recently been adopted by the UK’s financial sector.  At the end of 2018, Pay.UK CEO Paul Horlock announced the launch of the Mule Insights Tactical Solution (MITS), a new technology that marks a significant milestone in the UK’s fight against money laundering. Money laundering is how fraudsters move and obscure stolen money throughout the banking network; staggeringly, up to $2 trillion is estimated to be laundered globally each year. MITS is powered by Vocalink Services’ Anti-Money Laundering insights technology, which provides financial institutions with a much-needed tool to track the flow of fraudulent transactions through multiple bank and building society accounts, enabling them to take swift action. 

The sector is certainly making rapid headway in detection, identification and prevention. However, the next step is to better enable financial institutions to repatriate stolen funds to the victims of fraud and scams. Unfortunately, under current UK law, once funds have been moved to an alleged scammer the customer no longer has legal title to them. This generally means a court order is needed to return the funds. It’s therefore vital that the government and regulators work together to rapidly resolve this. In the meantime, businesses should implement thorough, yet ultimately simple, procedures - such as double-checking invoices, educating their teams, or putting in place additional checks and processes - before payments are submitted.

As we start 2019 with a range of ground-breaking new technologies to support the financial sector, we believe that businesses could be in a much better place than they think, and fraudsters won’t be one step ahead for much longer.