The Times has recently published an article on fraud affecting small and medium-sized enterprises (SMEs), in which Gowling WLG's Alex Jay was quoted. The article itself draws on research from SAS and the Centre for Economics and Business, which has shown that efficiencies gained by businesses through the use of improved fraud detection tools could total £290 million from 2015 to 2020.
According to Gerry Carr, chief marketing officer at anti-fraud start-up Ravelin, the majority of SMEs do not have their own fraud prevention systems in place and instead they rely solely on the fraud detection provided by their payment gateway. Mr Carr said “The main job of a payment gateway is to validate your customer’s credit card details securely, and make sure the funds are available for the payment and you get paid. As they only typically see the payment page activity, because they simply need to approve or decline a transaction, they are not able to see all the events in the customer journey, thus limiting their ability to provide end-to-end fraud protection”.
Aside from the financial risk posed by fraud, the consequences are potentially much greater. “In the case of an SME that itself is implicated in a fraud, perhaps bribery to secure a contract, it could find itself the subject of an SFO (Serious Fraud Office) or other regulatory investigation,” says Alex Jay, partner at Gowling WLG, counter-fraud specialist and a member of the independent Fraud Advisory Panel.
The costs of responding to and addressing such an investigation, both financially and reputationally, can be detrimental. Mr Jay says: “For company directors or senior management personnel, failing to implement anti-fraud measures or control such risks could also give rise to criticism or even claims against them in severe cases.”
Training is crucial, but Mr Jay says: “Any training programme should be considered with input from a variety of areas of the business and preferably with the assistance of anti-fraud professionals to ensure it is fit for purpose. An SME should look to have regular fraud risk assessments, and seek to develop an anti-fraud culture and policies within the business. A focus on increasing the perception that fraud will be investigated, detected and not tolerated is a good place to start."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.