Biggest challenges in fraud prevention

Fraud is a growing concern for UK businesses.

Our research found that 55% of businesses expect the risk of fraud to increase over the next 1-3 years, yet only 28% feel very confident in their ability to prevent it. 

That lack of confidence is understandable - one in four UK businesses have experienced fraud, with invoice fraud being the most commonly reported type. Even more concerning is the knowledge gap. UK Finance found that 43% of businesses didn’t realise invoice fraud even existed.

The reality is that many organisations are vulnerable without fully understanding what fraud looks like, leaving them exposed.

Fraud is a broad term that covers a wide range of crimes, and the ones that you are most at risk of can depend on the industry you work in. These are some of the most common threats you may encounter:

With the digital onboarding boom, the process is much faster and customer experience has been streamlined. However, the digitisation of this process also makes impersonation easier, so businesses who rely on digital onboarding may be putting themselves at risk if their identity verification process isn’t watertight. 

An example of this in practice is Engeneum CEO Chris Haden, who despite ignoring an obvious phishing attempt, had loans and credit cards taken out in his name and his pension withdrawn. Not only did this have a major impact on Haden, but also for the credit providers who had to absorb the losses.

So, what is the takeaway for financial institutions in these scenarios? 

Having access to company credit reports is a must. They strengthen identity checks by allowing businesses to cross-reference company information and run essential KYC and AML checks.

ID Verification adds another layer of protection, ensuring the individuals behind a company are who they claim to be. As a result, you’re more likely to catch a fraudster out before they do any damage.

And, if you need more details on an individual to make a decision, Verify can give you insights into County Court Judgments (CCJs), address, insolvencies, mortality records and their residency so you have a full view of their financial stability.

Fraudsters often apply for credit from multiple lenders in a short timeframe, relying on the fact that activity isn’t always shared between businesses. 

External credit data can provide much needed context here. For example:

• Credit report enquiries from other lenders suggests a company is applying for finance elsewhere. A sudden and steep increase should ring alarm bells.
• Finance agreement data highlights how consistently a company pays its debts or if there’s a change in behaviour. Consistent non-payment of debts is often a sign of trouble ahead.

Not all concerning payment behaviour is due to fraud, but why take the risk? Having a broader view allows for better decision making.

Fraud doesn't always happen overnight if the attacks are more sophisticated. There are often early warning signals, such as late payments or unusual credit activity. Without ongoing monitoring, these signs are easy to miss.

Regularly reviewing customers and suppliers through a company credit report gives you real-time visibility of changes that may point to fraud or more general financial distress. Integrating this data directly into your CRM using an API makes risk monitoring even easier and reduces the chance of human oversight.  

Additionally, you can also monitor your own company credit report to make sure that no one is making unauthorised changes to your business details, or opening accounts and taking out finance in your name.

If you have a large portfolio of accounts, or simply don't want to rely on manual checks, you can set up Company Monitoring to be notified of when significant changes happen.

Effective fraud prevention depends on accurate data. When your data is scattered between systems or incomplete, it’s much harder to spot patterns and emerging risks. In addition to this, every extra system adds another entry point for attackers.

Consolidating your data into a single source of truth helps teams identify issues quickly, while also limiting the number of systems that need to be secure. 

Likewise, a lack of data is also a challenge, especially when dealing with new businesses with limited trading history. Access to broad, reliable external data available in a credit report is the best way to fill the gaps, giving you a clear picture to assess fraud risk. Information such as finance agreement data, which unlike annual accounts provides a real-time view to financial health, can help you spot unusual activity early.

Many industries are legally required to carry out KYC and AML checks. But the effectiveness of these checks relies heavily on the tools used to perform them. Manual document gathering not only leaves room for error, but also increases admin time. If these checks aren't done properly, you not only risk legal trouble, but leave yourself vulnerable to working with individuals who have a past history of fraud.

KYC Protect helps you to establish the key players in a business so you can create full profiles that helps you identify risk. With data available on disqualifications, sanctions, insolvencies, adverse media, PEPs and more, you can determine what level of risk you’re comfortable with.