The UK is being hit by a wave of commercial frauds – with a potential price of PS5 billion in the aftermath of the Covid-19 pandemic.
Criminals profited from this Covid Bounce Back Loan (CBBL) scheme, a crucial security measure for legitimate companies that made a difference in a few firms that could stay afloat.
In this scheme, banks loaned more than PS46bn; however, only minor checks were conducted for loans of up to PS50,000. The official estimates suggest that anything between PS3.3bn to PS5bn may be lost due to fraud, and just 1 percent of the lost or stolen money was recovered.
The scope of this fraud in the business world isn’t yet understood fully. It reveals the danger of fraudulent companies lurking below the surface and putting legitimate companies at risk. In this article, we’ll look at the steps businesses must take to safeguard themselves from threats.
UK firms are counting the costs of business fraud.
The number of fraud-related crimes within the UK is rising – to 25% compared to the year before, according to the most recent data from ONS.
The amount of cases that have reached the court has also increased at pre-pandemic rates, topping PS1.12bn. However, this information indicates that CBBL fraud cases aren’t yet in court. Likely, those responsible for this criminal crime are out there.
Businesses must take extra care to shield themselves from the hidden danger. Identity theft, financial loss, and reputational damage are all in play.
What are the distinctions between third-party fraud and first-party business fraud?
To discern what to look for, let’s examine the different kinds of fraud:
First-party fraud is the case where a person has created several company names and registered them in the exact location, after which they applied for various loans without the intention of remitting the funds. It is believed to be one of the methods employed in the Covid Bounce Back Loan (CCBL) frauds. A simple test can confirm whether there are no existing loans at the address you used and under an alternative company name. These checks should also highlight any other unusual or suspicious behavior in the history of the profile.
Third-party fraud is impersonation fraud when someone has taken your business’s identity and credit under your name. In this case, to prevent it’s about something other than checking your credit report but rather confirming that the individual who is applying (the person who owns this business) is the person they say they are.
How can data be used to aid your fraud prevention strategies?
Data serves as a security net that businesses can rely on to help confirm and verify the people they work with.
Data can, for instance, be used to confirm the information on an application or cross-check the commercial address against other data sources.
This essential hygiene aspect has to be considered in every supplier or customer interaction. Conducting a thorough check on the business you’re trying to deal with and the individual responsible for that company is the beginning point.
Here are a few key questions to be asking to make sure that the verification of a company is secure, supported by information and data:
- Does the company’s identity sound genuine, or is it fake?
- What are the details of the firmographic data for your business? And is it possible to verify this information?
- Companies don’t do fraud, but people do. How do we know who is behind the business?
- Were directors involved in any of the previous but now defunct firms?
- What kind of products are they buying, and do they make sense for the company to buy them?
These questions could be part of a larger fraud risk assessment framework that allows you to look at your business from a fraudster’s perspective and ensure your company is always one step ahead of fraudsters.
Applying this philosophy to your processes will bolster the defenses against fraud.
There was a rise of 251% in the theft of business identities in 2020, as per Dun & Bradstreet data. Thus the increase in business fraud can’t be ignored.
While the extent of the Covid Bounce Back Fraud in lending is yet to be established, businesses can take a few steps to safeguard themselves. By focusing on the hygiene aspects of validating and verifying their claims, they will be better positioned to protect their reputation and themselves.