Financial Services industry losing £165 million in invoice fraud

Source: Tungsten

Businesses in financial services (FS) are losing more than £165 million in invoice fraud every year.

According to the new research published today by Tungsten, this amounts to £1,969 per business. Of those affected, one in five believes the fraud has cost them more than £5,000 in the last year alone.

Concern about the scale of the fraud is greater in the FS industry than other sectors with 61 per cent perceiving it to be the single biggest threat facing their business – more so than losing a major contract, a member of staff or competitor activities. Fifty eight per cent of FS business owners are troubled by the rise in cyber-crime, compared to a national average of 54 per cent.

Of the FS companies surveyed, 60 per cent have received a fraudulent or suspicious invoice in the last year – this is significantly more than any other sector and the national average of 47 per cent. 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.

If they received a suspicious invoice, 43 per cent 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: “Considering all the challenges firms face every day it’s telling that cyber-crime looms so large. The FS industry seems particularly attuned to the threat, which is good, but there are steps they can take to protect themselves.

“Technology such as electronic invoicing can help them 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 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.”

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