14th June 2023
How to Minimise Invoice & CEO Finance Fraud Attacks on your Business
Business fraud has reared its many ugly heads again as reported in various recent industry articles including Leasing World covering asset finance fraud such as ghost assets; asset inflation; identity theft; authorisation fraud; phoenix fraud, and fresh air invoicing. The persistence of invoice and CEO fraud in the UK, as highlighted by the 2023 UK Finance Annual Fraud report, is indeed a concerning issue for businesses, and having implemented a number of due diligence processes here at Davenham, we provide our own stance below on how you can combat fraudulent attempts on your company.
What are Invoice and CEO fraud?
Invoice and CEO fraud are types of financial scams that can have severe consequences for organisations, leading to financial losses and damage to their reputation.
Invoice fraud typically involves criminals sending fake invoices or altering legitimate invoices to redirect payments to their own accounts. They may impersonate a trusted supplier or create a fictitious company to deceive businesses into making payments.
CEO fraud, on the other hand, occurs when fraudsters impersonate company executives, often through email or other communication channels, and manipulate employees into making unauthorized financial transactions.
The Annual Fraud report shows that the total amount stolen through fraud in 2022 was £1.2 billion and that businesses remain a prime target for scammers in invoice and CEO fraud - the total value of CEO scams increased by 11% from £11.6m in 2021 to £12.9m in 2022.
Why are businesses still being caught out by fraud?
Despite an increase in awareness of potential fraud and investment in cyber protection tools, these types of fraud have persisted over time because they can be highly sophisticated, exploiting vulnerabilities in the human element of financial processes. They often rely on social engineering techniques to deceive employees, exploiting their trust or lack of awareness about the fraudulent activities. Additionally, advancements in technology and artificial intelligence (AI) have made it easier for fraudsters to create convincing fake invoices or imitate company executives' communication.
Seven steps to help protect your business from Invoice and CEO fraud
To address the risks associated with invoice and CEO fraud, businesses need to prioritise robust internal controls, employee education, and technological solutions. Here are some key measures that organisations can consider:
It is important for businesses to remain vigilant and adapt to evolving fraud techniques. By combining employee awareness, stringent internal controls, and technological safeguards, organisations can significantly reduce the risks associated with invoice and CEO fraud and protect their financial interests.
If you would like to learn more about the latest fraud trends and how you can work with other professionals to reduce fraud and its impact, visit northwestfraudforum.co.uk.
At Davenham, fraud is something we are very alert to and work hard on our valuations, risk and underwriting, and our general due diligence processes, to highlight any fraudulent activity. We work alongside our brokers to ensure our diligence is maintained when receiving proposals. If you would like to know more about how we work, please contact us on 0161 832 8484 or email enquiries@davenham.co.uk.
What are Invoice and CEO fraud?
Invoice and CEO fraud are types of financial scams that can have severe consequences for organisations, leading to financial losses and damage to their reputation.
Invoice fraud typically involves criminals sending fake invoices or altering legitimate invoices to redirect payments to their own accounts. They may impersonate a trusted supplier or create a fictitious company to deceive businesses into making payments.
CEO fraud, on the other hand, occurs when fraudsters impersonate company executives, often through email or other communication channels, and manipulate employees into making unauthorized financial transactions.
The Annual Fraud report shows that the total amount stolen through fraud in 2022 was £1.2 billion and that businesses remain a prime target for scammers in invoice and CEO fraud - the total value of CEO scams increased by 11% from £11.6m in 2021 to £12.9m in 2022.
Why are businesses still being caught out by fraud?
Despite an increase in awareness of potential fraud and investment in cyber protection tools, these types of fraud have persisted over time because they can be highly sophisticated, exploiting vulnerabilities in the human element of financial processes. They often rely on social engineering techniques to deceive employees, exploiting their trust or lack of awareness about the fraudulent activities. Additionally, advancements in technology and artificial intelligence (AI) have made it easier for fraudsters to create convincing fake invoices or imitate company executives' communication.
Seven steps to help protect your business from Invoice and CEO fraud
To address the risks associated with invoice and CEO fraud, businesses need to prioritise robust internal controls, employee education, and technological solutions. Here are some key measures that organisations can consider:
- 1. Education and awareness: Regular training for employees informing them of the most common and latest fraud schemes, emphasising the importance of verifying invoices and scrutinising unusual requests, especially regarding financial transactions.
- 2. Strong internal controls: Implement effective internal controls, such as requiring multiple levels of authorisation for payments, implementing segregation of duties, and conducting regular audits to detect and prevent fraudulent activities.
- 3. Verification procedures: Establish clear procedures for verifying invoices and payment requests, including verification through independent channels like phone calls or in-person confirmation.
- 4. Secure communication channels: Ensure that communication channels, especially those involving financial transactions, are secure and have authentication measures in place to prevent impersonation or hacking attempts.
- 5. IT security measures: Implement robust cybersecurity measures, including email filters, firewalls, and regular software updates to protect against phishing attempts and other cyber threats.
- 6. Supplier validation: Maintain a comprehensive supplier validation process, verifying the legitimacy of new suppliers before engaging in financial transactions with them.
- 7. Reporting and response mechanisms: Encourage employees to report suspicious activities promptly and establish a clear response plan to address any potential fraud incidents swiftly. Communication within the team will help minimise multiple attempts to scam your business.
It is important for businesses to remain vigilant and adapt to evolving fraud techniques. By combining employee awareness, stringent internal controls, and technological safeguards, organisations can significantly reduce the risks associated with invoice and CEO fraud and protect their financial interests.
If you would like to learn more about the latest fraud trends and how you can work with other professionals to reduce fraud and its impact, visit northwestfraudforum.co.uk.
At Davenham, fraud is something we are very alert to and work hard on our valuations, risk and underwriting, and our general due diligence processes, to highlight any fraudulent activity. We work alongside our brokers to ensure our diligence is maintained when receiving proposals. If you would like to know more about how we work, please contact us on 0161 832 8484 or email enquiries@davenham.co.uk.