Millennial entrepreneurs (i.e. those aged 18 – 35) are the most vulnerable to fraud attacks, with over one third (35%) of young business owners claiming to have been a victim of invoice, mandate or CEO fraud. According to research from Accura, the insights business of VocaLink, this increases to 55% for businesses with owners aged under 25, but is as low as 2% for business owners aged over 45.
The research suggests that fraudsters are actively targeting inexperienced business owners with invoice-related scams, and are successfully duping them into paying money into a false bank account, instead of to a legitimate supplier. While the problem of business-related fraud is widespread, with a quarter (27%) of SMEs surveyed saying that fraudsters have attempted invoice, mandate or CEO fraud on their organisation, the issue appears to be heightened where the owner is aged under 25, with 58% of them having had fraudsters try to pilfer money.
Even more alarming is that in the majority of cases (over 90%) the fraudster was successful in conning the young business owner out of money. Where more experienced owners are running the business, the fraud attempt appears to have been stopped in most cases before any money was lost. This may not be surprising when over one third (34%) of millennial business owners admitted that their accounts team doesn’t have a process in place to double check account details when invoices are received.
Jim Wadsworth, Managing Director, Accura said: “We often hear about the elderly being the most vulnerable to fraud but in these instances it appears that younger business owners are being actively targeted by and falling victim to fraudsters. When new businesses are set up, owners are understandably focussed on the speed of growth but it is also critical that they ensure they take the time to protect their businesses from the outset. If they do not, the implications can be severe.”
The research also uncovered a lack of knowledge in relation to liability in the instances of these types of fraud. While only 15% of business owners aged over 25 believed that the bank would be liable and cover their cost, half (53%) of business owners under the age of 25 inaccurately believed that the bank would be liable if they lost money to fraudsters in this way.
Wadsworth continued: “The recent Which? super-complaint has highlighted the issue of liability in relation to fraud. What is concerning here is that many young business owners don’t realise the potential implications of falling victim to this type of fraud. Unfortunately, once money is lost to invoice, mandate and CEO fraud it is seldom recovered. Many businesses then find out that they have to cover the loss, as they still owe their legitimate supplier. Some have been forced to close as a result and people have lost their jobs and their livelihoods.”
Where invoice or mandate fraud has occurred, nearly half of the businesses affected (45%) said that the business either folded or lost thousands – and in some cases millions – of pounds. Three in ten (30%) of the organisations impacted had to cut jobs or scale back the business as a direct result, and one third (33%) recognised that they had to tighten up the invoice processes.
In an attempt to combat this kind of fraud and to protect business owners of all ages, Accura has recently launched an anti-fraud solution that identifies and flags suspicious payments before the money leaves a business’s bank account. The system looks for unusual characteristics in the invoice, such as a destination bank account number that has never been used before and atypical payment amounts to help small businesses manage their risk. This is now up and running with a leading UK bank, helping to protect their business banking customers from these types of fraud.
Wadsworth concluded: “It is understandable that SME owners struggle to stay on top of all aspects of their business but we are deeply concerned about these findings, especially in relation to younger entrepreneurs. As well as benefitting from cutting-edge anti-fraud solutions like those being developed by Accura, there are simple steps that SME owners can take to help prevent invoice fraud and hopefully keep more small businesses in business. For example, make it policy that any change of bank account by a supplier is always validated by a channel other than email, preferably through two contacts.”