The fight against fraud at our fingertips

Feb 3 2010 by Chris Knox, The Journal

As well as wide-scale job losses and failing businesses, another consequence of the economic downturn has been the rise in fraud cases. Christopher Knox finds out more.

THE events of the last two years have dramatically altered the economic landscape, and although we may be out of the recession, both analysts and bosses are cautious about the speed at which the UK can recover.

While much of the news has focussed on the fall in spending and the difficulty in raising money, an unseen threat has also picked up as a result of the economic decline.

Fraud is often seen as a threat that affects few businesses, usually those with more to lose and are cash and asset-rich.

But this is a myth and there has been a big increase in fraud among small to medium-sized businesses over the last year which has alerted people to a threat that may have previously escaped their attention.

New figures by the National Fraud Authority (NFA) shows that fraud costs the Government, businesses and consumers more than £30bn a year, with tax fraud representing the biggest area of loss, which is estimated at £15.2bn – around 3% of overall tax liabilities.

Tens of thousands of fraudulent emails were expected ahead of last Sunday’s tax return deadline, with victims told they are due a tax refund and asked to fill in an online form with bank or credit card details.

Credit card fraud is also an area that continues to be a hunting ground for criminals, with 0.1% of all transactions part of a fraud scam.

The rise in e-crime is also having a major impact on businesses in the North East. Research by KPMG shows that, outside London and the South East, the North East saw the highest number of serious fraud cases last year, with 42 cases involving £100,000 or more recorded in the region, out of a UK total of 271.

James Jones of credit reference agency Experian said: “These figures should act as a wake-up call and encourage us all to take steps to safeguard our personal details.

“Many of us put our identities on a plate so it’s hardly a surprise that the identity crooks have been having a feast.”

Fraud is proving a major problem for SMEs, with figures from the Federation of Small Businesses revealing that these companies lose on average up to £800 a year to fraud and online crime.

More than half of businesses reported being a victim of crime in the 12 months to February 2009 – 37% having problems with phishing emails, 15% falling victim to card-not-present fraud and another 15% falling foul of IT problems caused by viruses and hackers.

Most fraud, where it has a financial impact, costs small businesses between £500 and £5,000, while the average cost across the sector is £768 a year.

Alan Brown, chairman of fraud prevention organisation the North East Fraud Forum (NEFF), said: “Last year saw a big increase in cases of fraud, with the recession having a big impact on the figures.

“Although most of the larger blue chip companies have been aware of this and have introduced the appropriate defence measures, many small businesses have been ill-equipped to handle the increased threat due to their financial position.”

Mr Brown has been at the forefront of fraud prevention ever since the creation of the NEFF in 2003, which is a coming together of representatives of the public and private sectors to help raise awareness among businesses of the latest scams and frauds and educate them on topics such as counterfeiting and money laundering.

The NEFF, whose 200 members include police forces, universities and businesses, also plans to build a multi-million-pound anti-fraud institute in the region backed by European funding and has been instrumental in the establishment of similar forums around the country.

The forum works to educate North East business leaders about the latest developments in controlling fraud through a series of seminars and workshops.

The most recent workshop touched on a wide variety of issues, with a particular focus placed on internet fraud, identity fraud and card fraud and how these can affect business.