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Guide to preventing fraud in business

Guide to preventing fraud in business

According to the UK initiative Action Fraud, 1 in 4 small businesses are affected by fraud every year, amounting to an annual loss of £18.9 billion. Fraud is a real threat that can potentially lead to a serious loss of money. Given the statistics, it’s not something that small business owners can afford to be ignorant of.

Thankfully, while completely preventing fraud in business is a mammoth task, there are numerous things that business owners can do to minimise their risk and to catch fraudulent activities when they’re at an early enough stage to be dealt with efficiently.

As experts in document security, the Shredall SDS Group exists to help businesses keep their documents in order and their data secure, helping these businesses keep their risk of fraud to a minimum. We’ve picked up a few tips on the way that we can pass on to help your business stay fraud-free.

Identifying where you could be at risk

The precise nature of the fraud risks any given business faces can vary, but the more generally applicable risks can be summarised into four broad categories:

  • Risks from customers
  • Risks from employees
  • Risks from suppliers and service providers
  • Risks to business assets

The first three points encompass all of the people that could pose a threat to your business. You’ll notice that the net has been cast fairly widely, but that’s because fraud risks can come from almost anyone who has a relationship with your business.

Risks from customers

Whether you’re dealing with customers on physical premises or online, there are ways for fraudsters to con you out of money. Counterfeit currency, fake or stolen payment details and fake orders can all cause problems. It is important to understand the traits of genuine customers and payments to help you catch fraud early.

Risks from employees

No small business owner wants to think that their employees could be out to defraud them, but it happens to 1 in 5 businesses at some point in their history. Risks from employees often come from intentional attempts to defraud a business through fake expenses, embezzlement and the like, but they can also come from negligence, where employees are leaving the company vulnerable to fraud by doing something poorly or not doing something they should be.

Risks from suppliers and service providers

Other businesses that your company has regular dealings with can defraud you if you’re not careful. Common activities include overcharging and not delivering the goods or services that were promised.

Risks to business assets

In order to understand which areas of your individual business are most at risk from fraud, it’s essential to know what your assets are. Tangible assets include your buildings, equipment and cash in the bank, but you should also be mindful (perhaps even more so) of intangible assets such as any customer data you hold, your business’s brand and identity and even the ideas that you have for future development.

Different types of fraud

Anyone associated with your company could attempt to defraud you, and the ways they could do so are numerous. There are too many different types of business fraud for us to go through in this blog post, so we’re going to focus on those that are more closely tied to our fields of expertise.

Business identity fraud

Fundamentally, business identity fraud (or business identity theft) is where a fraudster impersonates a business, not any single employee or director of the business. This type of fraud involves stealing or misusing a business’s credentials, such as login details or bank account information.

Business identity fraud can be used to steal money from the company itself, to alter key financial reporting documents, to purchase something using the businesses accounts, or a host of other related activities. Companies leave themselves vulnerable to this type of fraud when they fail to restrict access to sensitive information and passwords, whether they’re held in a digital capacity or available on physical documents.

Intellectual property theft

Intellectual property theft involves someone copying a company’s creative property and using it for their own gain. Intellectual property is a form of intangible asset and encompasses any products, inventions and designs that have been copyrighted, trademarked or patented. It could be anything from the contents of a book, to the designs for a new aircraft component, to your company branding.

In some cases, a criminal could steal your intellectual property simply by accessing what’s available to the public, such as your branding. There’s nothing you can do to prevent it, except pursue civil or criminal action wherever you find evidence that theft has occurred. However, other kinds of IP theft could occur if someone gains access to internal documents, such as designs for a new product. Implementing document security policies and measures is essential to minimise this risk.

Company data hacking

The data that your company holds on employees and customers is a valuable asset that will be an attractive target for hackers or others who have access to company documents and online files. Customer data can be sold or even ransomed for a lot of money should it get into the wrong hands.

Document security

As you’ll have seen by now, the common theme in combating these different types of fraud is to take every precaution to restrict access to documents to only those employees who need to see them and can be trusted to do so. Other initiatives, such as clean desk policies and document retention policies can ensure that documents containing sensitive data aren’t seen by people who shouldn’t have access to them.

Working with a business like the Shredall SDS Group helps to ensure that your documents aren’t putting your company at risk from different kinds of business fraud. We help to securely destroy documents that aren’t needed and can store those that aren’t needed regularly in a safe, off-site location. Our document scanning service can also turn vulnerable physical documents into digital documents whose access can be restricted and controlled more easily.

Whatever your business does and whatever risks you may be vulnerable to, the starting point should be clear anti-fraud policies and employee education. If everyone in the company is on the lookout for the telltale signs of fraudulent activity, it will be much harder for a fraudster to get away with anything, regardless of who they are how they’re targeting your business.

For more information, visit the Action Fraud website.

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