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Caterers Beware: Invoice Fraud Reaches Highest Levels

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Caterers Beware: Invoice Fraud Reaches Highest Levels

Caterers Beware: Invoice Fraud Reaches Highest Levels
November 08
13:14 2016

craig-kennedy-low-cropSimple and frighteningly effective, invoice fraud hit one in six British SMEs last year, and the hospitality trade makes an attractive target for criminals. Craig Kennedy looks at this remarkably effective scam that cost UK firms £9bn last year.

What is invoice fraud?

Invoice fraud is a technique used by criminals to divert funds due to genuine suppliers into their own bank accounts. This is often done by intercepting an invoice and changing its payment details. When the invoice is paid, the funds go to the fraudster rather than the genuine supplier. The average victim will lose more than £5,000 before the scam is discovered and payments stopped.

There are variations on the scam, such as when a fraudster contacts a victim impersonating a supplier to say that their bank account details have changed. Such requests are often made by email, where a small change to a familiar email address is usually all it takes to trick businesses into thinking that the request made is genuine.

Are Scottish hospitality firms at risk?

Any business that requires to pay invoices is at risk, and those that regularly pay many different suppliers are particularly exposed. Often, fraudsters seek to exploit weaknesses in the financial processes of the intended victim by creating a sense of urgency around the payment by, for example, issuing a final demand for payment.

What measures should firms be taking to prevent invoice fraud?

In most cases, a few simple steps can prevent invoice fraud. However, last year’s statistics show that many businesses are just not careful enough when it comes to paying invoices.

All unexpected changes to payment details must be checked with a trusted source within the organisation looking to make the change. Suppliers are unlikely to mind clients checking that they are sending money to the right place, and proactively querying inconsistencies is one of the most effective ways of preventing most types of invoice fraud. Whether you know the supplier personally or not, all it takes is a phone call – but don’t take the number from the suspect invoice.

In addition, some invoice fraud is perpetrated by dishonest people working for the victim. Members of staff who have access to financial information should be thoroughly vetted to avoid employing someone who might facilitate this type of fraud. Staff should also be trained to spot inconsistencies on invoices received, and to flag changes in payment details.

What if I’ve already made a payment before I realise it was a scam?

Many victims only discover an invoice fraud when the genuine supplier contacts them to advise that payment remains outstanding. As soon as a business suspects that it has been a victim of invoice fraud, it should immediately contact both its bank and the economic crime team of its local police force, in an attempt to stop the payment being made. The first few hours following the release of funds are critical.

If the payment can’t be stopped, various potent remedies can be obtained from the civil courts to trace, freeze and recover the misappropriated funds – but of course, firms should try to ensure that they recognise scams before payment is made.

Craig Kennedy is head of the Fraud, Investigations and Business Crime team at Maclay Murray & Spens LLP.

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Catering Scotland

Catering Scotland

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