2 common SME scams that all business owners should be aware of

woman making a card payment online

The latest scam figures from UK Finance make for sobering reading. In the first half of 2021, criminals stole a total of £753.9 million through fraud, an increase of almost a third (30%) compared to the same period in 2020.

While the focus is often on individuals losing their savings or pension to fraudsters, the trade association has also issued a warning to business owners about the increasing prevalence of scams affecting small and medium-sized businesses (SMEs).

Martin McTague from the Federation of Small Businesses says: “Business crime is a serious issue for small firms right across the country, with fraud being one of the key problems at hand and one that has only been accelerated due to the increase in online trading and e-commerce during the pandemic.

“Small businesses face almost 4 million cases of cybercrime each year, predominantly focused on malware and fraudulent payments, so the need for vigilance has never been more important.”

Let’s start by looking at the scale of the problem.

Businesses lost almost £60 million in 6 months to fraud

UK Finance has issued a warning to SMEs to be alert for scams targeting their companies – especially in an environment where many firms might be working outside their normal processes.

With many people still working from home, fraudsters are using this as an opportunity to steal money by using a range of impersonation and invoice scams.

Scammers will often try to impersonate a chief executive, senior manager, or supplier in an attempt to convince staff to make an urgent payment or to change the existing bank account details held on file.

These scams result in the victim transferring money to a criminal. UK Finance report that, in the first six months of 2021, businesses lost £59.2 million to these frauds, an increase of 35% when compared to the same period a year earlier.

Additionally, in a survey conducted for the Take Five to Stop Fraud campaign, 80% of SMEs said they had received an unsolicited text or email request for money and personal information. Almost two-thirds (64%) had received unsolicited phone calls.

Worryingly, the survey also found that although 62% of SMEs said they were more aware of fraud since the start of the pandemic, 1 in 6 (16%) did not challenge an unsolicited phone call requesting money or personal information.

If you run a business, or you work for an SME, read on for some valuable advice on what to look out for and how to avoid a scam.

2 common scams targeting businesses

UK Finance highlight two common scams that target businesses.

CEO scam

Here, criminals impersonate a manager or a senior manager to convince staff to make an urgent payment outside of their business’s internal procedures.

A fraudster will sometimes gain access to a business’s email account by hacking or use spoofing software. They will then email a member of the finance team with what appears to be a genuine email from their boss or a senior manager.

Invoice and mandate scams

Criminals pose as regular suppliers and convince a business to change their existing bank account details on file. SMEs are then tricked into sending money to the account, which is controlled by a scammer rather than the genuine supplier.

3 steps to prevent becoming the victim of a scam

If you want to avoid becoming the victim of a small business scam, the Take Five to Stop Fraud campaign outlines a three-step process that you should encourage all staff to follow:

  • Stop – If you receive a request to make an urgent payment, change supplier bank details or provide financial information, take a moment to stop and think.
  • Challenge – Could it be fake? Verify all payments and supplier details directly with the company on a known phone number or in person before authorising or sending a payment.
  • Protect – Contact your business’s bank immediately if you think you’ve been scammed and report it to Action Fraud.

UK Finance have shared an example of how following this process can help to avoid becoming another fraud statistic.

A woman in Kent saved her employer 500,000 euros by cleverly identifying a fraudulent email.

Just a few months into a new role within the “accounts payable” department at a UK-based manufacturing company, the woman received an email claiming to be from a long-standing supplier saying they’d changed their bank details.

She challenged the change, and flagged it to her MD. Her instinct was right – it was a scam.

Liz Barclay, small business commissioner, said: “Imagine that a supplier emails you, saying that they need urgent payment to new bank details. It would be very easy to get sucked in by an email which looks genuine when you’re in a rush.

“Please, please take nothing at face value and check with anyone you need to pay before responding to texts, emails or calls. We need to make it impossible for the scammers to scam us.”

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