That’s the conclusion of new research by insolvency trade body R3, which found that 66% of the companies it surveyed across the North East, Yorkshire and Humberside have no formal measures in place to prevent and detect fraud.
And the actual proportion could be even higher, as a further ten per cent of the senior financial decision-makers that R3 questioned said they didn’t know what fraud prevention policies their employers had adopted.
The regional figures are higher than the national average, with 54% of UK businesses saying they had no such policies in place, while a further 11% weren’t sure.
A recent report by the UK Fraud Costs Measurement Committee estimated that annual cost of fraud in the UK could be as high as £193 billion per year, a figure far higher than previous Government estimates, and that businesses in the private sector lose around three quarters of the overall amount.
Procurement fraud, includes crimes such as the submission of false invoices or the awarding of contracts in exchange for bribes, is seen as the greatest risk to businesses, whether they are SMEs or larger enterprises.
Neil Harrold, chair of R3 in the North East and a partner with Hay & Kilner Solicitors, says: “Fraud is a staggeringly expensive problem for the UK economy, and businesses in every sector and of all sizes are at risk, so it’s surprising and rather concerning that two thirds of regional firms don’t have precautions in place to protect themselves against such risks.
“Fraudsters are becoming ever more professional and innovative in how they target businesses, and our members have seen cases of fraudsters replicating company email addresses pretending to be senior staff, and writing to employees ordering the quick transfer of funds to a specific account – by the time the staff realise it’s a con, the money is long gone.”
Across the UK, small businesses were found to be most unprepared for fraud, with 70% of sole traders and 56% of companies with 2-5 employees have no agreed policy in place, compared to just 11% of firms with over 250 employees.
Just over half (53%) of companies with a website said they didn’t have an agreed fraud policy, with 48% of firms that accept online payments in the same position.
Neil Harrold continues: “Smaller companies are just as much at risk of fraud as their larger counterparts, but losses as a result of fraud could be much harder for them to absorb and recover from, while larger companies have a duty to shareholders and compliance regulations they have to meet.
“An agreed written risk policy should outline a company’s strategy for preventing, detecting and dealing with fraud, and while smaller companies understandably have greater constraints on their resources, setting out such a policy doesn’t have to be an onerous or expensive task.
“It’s also an opportunity to identify fraud risk factors, evaluate whether sufficient controls are in place, fill any gaps that are revealed and set out the steps to be taken if you are targeted.
“It’s especially worrying to see nearly half of UK businesses that accept payment online, which will involve customers sharing their personal financial information, aren’t taking preventative steps to protect themselves against fraud. This leaves not only the business, but their clients, exposed.
“It’s no surprise that the internet has proved a popular portal for fraudsters to target individuals and businesses. Companies with an online presence, whether they are a small local firm or a multinational corporation, are more vulnerable, and they all should have robust measures in place to minimise such risks.”