UK small and medium sized businesses (SMEs) are losing more than £9bn from invoice fraud every year.
According to the new research published today by Tungsten Network, this amounts to £1,658 per SME. Of those affected, one in six firms believe the fraud has cost them more than £5,000 in the last year alone.
The scale of the fraud is accelerating, with half of businesses (54%) concerned about its rise and viewing it as their single biggest threat – more so than losing a major contract, a member of staff or competitor activities.
Of the 1,000 companies surveyed, nearly half of all businesses (47%) have received a fraudulent or suspicious invoice in the last year and tactics have included: viruses embedded in attachments; unknown invoices attached to an email or sent by post; false changes to bank details; and sending duplicate invoices.
Tungsten’s research exposes the need to crack down on fraud in the UK and is backed up by the Government, which in February launched a new taskforce to combat fraud of all types. The Joint Fraud Taskforce will consist of representatives from the City of London Police, National Crime Agency, Financial Fraud Action UK, the Bank of England, and chief executives of the major banks. While focused on consumer fraud, its launch shows the scale and seriousness of the situation and the Government’s desire to identify and remove weak links in the UK’s financial systems and processes.
Worryingly, not every company is aware of the high stakes – 8% of businesses would take no action if they received a suspicious invoice and 13% of micro businesses wouldn’t know what to do. Only 44% of businesses would contact the police or a reporting service like Action Fraud, showing that there is still an education job to do in terms of knowing how to handle cyber-crime.
Richard Hurwitz, CEO at Tungsten, comments: “UK SMEs face all manner of challenges, and it’s telling that cyber crime looms as one of the biggest. What’s most troubling is that it needn’t be like this as there are steps companies can take to protect themselves. Technology such as electronic invoicing can help battle invoice fraud as only confirmed suppliers can upload their invoices and then these are validated before they are paid, potentially saving firms thousands of pounds. Tungsten currently handles more than 15 million invoices a year, with firms in 192 countries around the world transacting across the network.”
Pauline Smith, head of Action Fraud, the UK’s national centre for reporting fraud and internet crime, said: “It is important that employees are made aware of invoice scams and are ready to recognise the signs of fraud. Incidents of invoice fraud are underreported and therefore it is difficult to know the true scale of this fraud type. However what we do know is that this type of fraud prevails across all types of business and no one type of industry is immune. Those organisations that are worried they may fallen victim to fraudsters should always report to Action Fraud.”
Case study: London Borough of Bexley
Invoice fraud is not just confined to businesses, with public sector organisations also falling victim. Bel Temel, payments manager at the London Borough of Bexley, has witnessed multiple attempts of invoice fraud: “Our Borough has received fake invoices from anonymous professional fraudsters on more than one occasion. All our supplier contract information is on our website so this means we’re at risk of scammers accessing this information and pretending to be one of our suppliers.
“In most cases, the criminals have taken information from the internet to ensure the bogus invoice looks identical to the template of one of our suppliers. Generally the only way the naked eye can spot any difference is by cross referencing the bank details with those we have listed for our supplier.
“This means that the fake invoice can make it through every stage of the payment process before being picked up by us in the finance team. Unfortunately other local authorities have lost money by not spotting this and paying the balance of a fake invoice into the fraudster’s bank account.
“One way in which we’ve further protected ourselves against this threat is by introducing electronic invoicing from Tungsten Network. Now that our suppliers submit invoices through the platform, we know that every invoice received is 100 per cent legitimate. The technology ensures the secure transacting of invoices and this has significantly helped us combat invoice fraud. Since our take up of the technology in 2006, many other local authorities have followed suit.”