Identity fraud in SMEs: take early action to protect your business

Identity fraud in SMEs: take early action to protect your business

Data from Action Fraud shows that British businesses reported £88m of insider deception in 2017/18 – double the previous year – with the average loss rising to £62,000. Whilst financial fraud is a risk to every business of any size, SMEs certainly shouldn’t believe it won’t happen to them just because they are employing fewer staff or working within a smaller network. 

Identity fraud amongst employees presents a very real risk to SMEs. In fact, according to ActionFraud, 1 in 5 small businesses have been defrauded by an employee.

Fraudsters can think of small businesses as easy pickings because, in general, they don’t have the same levels of protection in place as larger firms. SMEs may not have the resources to properly check an applicant’s identity and are also more likely to employ people on a casual or ad hoc basis. Once staff are appointed, they often have many roles across an organisation, meaning they have greater access to company information and a close relationship between staff can lead to less scrutiny.

The impact of ‘internal fraud’ on any business can be devastating but SMEs suffer greater losses in relation to their size. What’s more, fraud can not only leave you out of pocket, it can also harm your reputation with customers and suppliers.

So, how do you protect your business?

It’s vital that small businesses take steps early to minimise the risk of internal fraud.

Know your employees

The first thing you should do in your organisation is make sure that the people that you are taking on are who they say they are. Be confident that you know your employees. Before an employee starts work for you, check their previous employment history, speak to previous employers and validate their identity documents thoroughly.

Know your suppliers

There are many entry points for criminals to get into your supply chain and commit fraud or theft. Your suppliers’ staff may be gaining access to your business, for example, if you outsource your office cleaning or use a delivery business who provide their own drivers.  

Make sure that you check out potential suppliers thoroughly before proceeding with a transaction. Find out how they check the identity of their staff and don’t worry about challenging their processes if they seem unsatisfactory. 

If you work with an employment agency to source temporary staff, make sure they are carrying out the necessary checks and don’t be afraid to ask to audit their staff and processes.

Technology can help

Your business no doubt already sees ID from your staff as part of your Right to Work processes.  Right to Work legislation means you’re required to ensure that the documents presented by staff are genuine, have not been tampered with and belong to the holder. However, many people who are going to commit crime in a business will try to do it under a false identity because it makes it harder for them to be traced. Most people can’t determine whether a passport is genuine or not: it’s unrealistic to expect an HR administrator or manager without significant training to spot a fraudulent document.

A simple electronic identity check can help. It validates the information on a document which fraudsters find most difficult to cheat. Checks take just a few minutes and help to identify and prevent people from using fraudulent documents to gain employment or access your services. Advertising the use of electronic identity checks also acts as a deterrent and may stop people from targeting your business in the first place.

Whilst it’s impossible to guarantee that you will never be a victim, these measures are a good start to protect your business as much as possible from fraud

Tony Machin

Tony Machin, CEO

Our CEO since 2013 has led our business through a program of significant upgrades in technology and services and has huge experience helping businesses introduce the right processes for identity document checks.

Want to find out more?

Check out our online validation services as a straight-forward, affordable first step to protect your business from identity fraud

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