Corporate fraud

Corporate fraud (also known as business fraud) can affect your business in many ways. It can come from outside, or from within. From theft to fake invoices, from cybercrime to CEO fraud. In this article: how can you prevent business fraud?

The main feature of corporate fraud, also known as business fraud, is that it is very similar to 'business as usual'. It does not stand out. Fraudsters copy reality. They mimic the habits of an industry in order to gain trust. For example, by placing an order in someone else's name. Everything seems to match. You immediately recognise the house style and think: this is all right. Only one letter in the e-mail address turns out to be different.

Or another example: fraudsters pose as the director of your company and ask a financial employee by e-mail to transfer money urgently. You can hardly tell from the email message that a fraudster is behind this. This is also known as CEO fraud.

The danger can also come from within. Employees who conveniently enrich themselves or secretly collaborate with your biggest competitor. Fraud of your own staff has many variants: expense report fraud, privately reselling your stuff, copying company information and passing it on to a competitor, violation of a non-competition clause and so on.
According to our fraud survey, SMEs and medium-sized companies are increasingly the victims of fraud. Until a few years ago, multinationals were the main targets of fraudsters. Fraudsters are increasingly discovering that it is not at all difficult to cheat companies out of money.

CEO fraud and fraudsters posing as customers or suppliers are a growing threat to companies. But not only criminal activities by third parties, your own employees can also cause damage.

Internal fraud is committed by one or more of your employees. Some well-known examples of internal fraud are

  • Payment of false invoices to a personal bank account
  • Theft of office equipment
  • Purchasing inappropriate business gifts
  • Using company funds to buy goods for personal use

External fraud is committed by people from outside the company to steal money or goods.  Examples of external fraud:

  • Identity theft: the well-known example where a fraudster poses as the CEO and CFO
  • Intercepting and forging invoices
  • Intercepting and forging orders
  • Forging votes, signatures or e-mails
  1. Be vigilant
    If you notice something strange, be cautious. Do not open any suspicious link from companies or people you do not know. Show the same distrust of the websites you visit.
  2. Give a call
    If you receive a suspicious e-mail asking you information about your company, call to check if the request is justified. Your financial institution will never contact you by email to request personal or confidential information.
  3. Know your suppliers
    The e-mail should not be your only means of communication with your suppliers and other partners or employees. Arrange other forms of contact with them. Get to know them well. This will allow you to identify earlier a request that does not fit with the habits of a supplier.
  4. Assign payment limits
    The limits granted to employees with little experience should be lower. Even if you are busy, do not try to avoid any work by assigning your employees higher limits. Assign appropriate financial limits and reevaluate them regularly.
  5. Apply dual approval
    Make sure at least two persons authorize the payments. This two-fold approval mechanism will protect your company. The check from a second person allow identifying errors or attempt of fraud that can be costly to companies.
  6. Check your bank accounts regularly
    If you closely follow the activity of your bank accounts, any fraudulent operation will immediately raise your awareness. Keep in mind that even if the policy of your financial institution is to reimburse any amount related to an unauthorized transaction, it may take time for reporting incidents. If you suspect any fraud, notify your bank immediately.
  7. Update your software
    An outdated software cannot adequately protect any information. Install an antivirus software and update it regularly, create backup copies and make use of external technology experts.
  8. Raise awareness among your employees
    Make sure your employees know the threats that currently exist and tactics used by fraudsters. Offer them training on the techniques and policies related to anti-fraud campaign. Regularly remind employees of the importance of being vigilant. These reminders are a very effective way of preventing fraud.
  9. Provide a procedure to follow in case of fraud
    Provide a procedure to follow and communicate it to all employees. In case of fraud, it will avoid panic reactions and allow your employees to act calmly, without haste and according to the established procedure.
Fraud can never be completely prevented. Nevertheless, there are things you can do yourself to prevent fraud as much as possible. Implement preventive measures and ensure clear agreements and checks. To help you, we created a fraud prevention guide. Packed with tips to stay ahead of business fraudsters. Completely free of charge!
It is an illusion to think you can eliminate corporate fraud 100 per cent. It means that sooner or later, you can come up against a hefty blow. With Allianz Trade's fraud insurance, you protect your company against losses caused by fraud such as financial losses, property damage and reputational damage.