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Five unknowing frauds

It’s estimated (by audit firm Crowe and the University of Portsmouth in 2019) that fraud cost the UK almost £190 billion in 2019. The cost of fraud is expected to continue to rise; what can UK businesses do to protect themselves against this illegal activity?

An anti-money laundering (AML) service, SmartSearch, offers five ways people could be committing fraud without even knowing it and what businesses can do to keep themselves protected.

Fronting

Fronting is where a car owner intentionally lies about who the main driver of the vehicle is in order to reduce their car insurance quote, which is now the most common type of consumer fraud in the UK. Recent statistics (from the counter-fraud trade association Cifas in 2019) show that half of the UK population said fronting was an acceptable practice, however, not only could it result in a criminal record, but it could also invalidate the insurance policy.

When it comes to the workplace, if employees are claiming on their business insurance for work trips, the correct checks should be imposed by finance and HR professionals within the business, to ensure any insurance policies are valid. Insurance providers can conduct AML checks or enhanced customer due diligence to ensure any claims on policies suspected of fronting are fully reviewed.

De-shopping

One in every 20 adults in the UK has engaged in de-shopping. This activity is where buyers purchase items of clothing with the intention of wearing the products before returning them for a full refund. De-shopping can be considered as attempting to gain ‘pecuniary advantage by deception’, which is an offence under The Theft Act, 1968 (c.60). It is important for businesses to stay vigilant when items are returned, however, there is a risk for retailers in reacting to genuine consumers with mistrust, as this may lead to consumers becoming equally distrusting of them. Good customer service practices and careful monitoring of how frequently the same customers are returning goods can help businesses avoid this common fraud.

Money Muling

Some see being a money mule as a stress-free, get rich quick scheme, however, the consequences can be devastating. The act of money muling is where a bank account holder allows criminals to use their bank account, in order to make the funds more difficult to trace, in exchange for a share of the money.

If the fraud is designed to extract money from an organisation, it may affect both the organisation and its customers or constituents. From January 2020, the fifth anti-money laundering directive (5MLD) became law throughout the European Union which aims to further combat financial crime by boosting existing transparency rules. A careful review of your current practices and processes to ensure your business adheres to all necessary regulations is always strongly advised.

Friendly fraud

Friendly fraud, also known as chargeback fraud, happens when consumers make an online purchase and then call their card issuer to request a refund, citing fraud as the reason. The credit card provider refunds the money and the consumer gets to keep the goods, leaving the seller out of pocket.

The challenge with friendly fraud for businesses, is that there is no way to verify the authenticity of the actual transaction, which may in fact be legitimate. While there is no way to prevent this type of fraud, businesses can implement measures to combat it, such as; good customer service practices, having a good refund policy and storing as much information as you can.

Opportunistic

Opportunistic fraud is a type of insurance fraud, however, unlike ‘crash for cash’ or ‘ghost broking’ schemes, opportunistic fraud isn’t premeditated and doesn’t involve a huge amount of planning.

It occurs when someone is in a genuine incident, but they then exaggerate the damage in order to get pre-existing damage fixed in the repair process. While most people see this as ‘harmless’, the dishonest action impacts the cost of insurance premiums, making them higher for everyone.

Car insurance has for many years been the most difficult market to police with regards to fraudulent claims. The UK Government has introduced an array of regulations but it is difficult to eliminate all fraudulent claims. To protect your business ensure that all business vehicles are fitted with dashcams so the footage can be reviewed by your insurer.

John Dobson, CEO at SmartSearch, says: “It is surprising how many UK adults have committed fraud without knowing, or think that some forms of fraud are acceptable. The impact these crimes have on the economy and UK businesses is extraordinary, and it should be at the forefront of your mind if you’re about to undertake any of the activities listed.

“There are a lot of ways businesses can strengthen their defences against money laundering and fraud, so it’s important that business owners and decision makers take the time to ensure they are abiding by all the fraud and money laundering regulations currently in place in the UK. We hope that by explaining these types of fraud, businesses and consumers can become more diligent on the types of fraud and their implications.”

To find out more about some of the biggest fraud and money laundering cases in recent times, visit: https://www.smartsearch.com/resources/blog/biggest-fraud-and-money-laundering-cases.


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