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Small firms suffer fraud to tune of '£800 a year'

Small businesses could be losing up to £800 annually as the result of fraud, it has been claimed.

According to the Federation of Small Businesses (FSB), fraud and online crime, where it has a financial impact, are costing firms between £500 and £5,000, with the average loss working out at £768 per year.

An FSB report, entitled Inhibiting Enterprise: Fraud and online crime against small businesses, found that more than half (54 per cent) of businesses reported being a victim of crime in the last twelve months.

Some 37 per cent said that they had experienced problems with phishing emails, 15 per cent fell victim to card not present fraud, and another 15 per cent suffered IT problems caused by viruses and hackers.

A third of small firms failed to report fraud or online crime to the police or their banks because they have no faith in the system.

More than half (53 per cent) indicated they needed clearer information about how and where to report this type of crime, while 44 per cent wanted a named contact in their local police force specifically focused on fraud and online crime.

To deal with the problem, the FSB urged the Police Central E Crime Unit and the National Fraud Strategic Authority, which aim to launch the National Fraud Reporting Centre later this year, to work together closely to ensure that the centre is established soon.

The FSB also said there should be a local police contact specialising in small business fraud and e-crime and that banks should take responsibility for informing businesses up front about the risks of card not present fraud.

Mike Cherry, the FSB’s small businesses home affairs chairman, said: “E-crime is becoming an increasingly serious issue for small firms, which are losing up to £800 a year to fraud and online crime.

“The internet is a huge and unregulated area, but businesses have to have confidence that there are at least some structures there to support them. It is important that the Police E Crime Unit and the National Fraud Reporting Centre work hand in hand to set up an effective system to gather intelligence and use it to investigate and prosecute when this crime occurs. Businesses are currently simply being left very exposed.”

In a separate report, the Chartered Institute of Management Accountants (CIMA) has argued that SMEs, which lack the formal detection systems of larger companies, could face a greater risk from fraud than multinational firms.

The CIMA said that SMEs may not realise that they are often more susceptible to fraudulent practices and that they can be hit by proportionately higher losses.

A recent CIMA survey of 200 member FDs in the UK found that 55 per cent believed that employee fraud posed a significant risk to their organisation.

Helenne Doody, innovation and development specialist at the CIMA, said: “Despite the serious risk that fraud presents to business, many organisations still do not have formal procedures in place to prevent, detect and respond to fraud. While no system is completely foolproof, there are steps that can be taken to deter fraud.”

CIMA has published a good practice guide on fraud management which can be found at www.cimaglobal.com/fraud