Preventing business fraud: Why trust isn’t enough
“I know my employees. I hired every one of them myself, and I know they’re not criminals.” Trust is a fine thing, but there always have to be limits. Even when a boss thinks they know their people inside out, when they’d trust them with their livelihoods, that trust is no guarantee that there isn’t a bad apple spoiling the bunch.
Who’s afraid of the bad apple?
According to a study by accounting firm PwC in 2022, almost 50% of businesses reported that they’d been a victim of white-collar crime at least once within the past 24 months. On average, each had fallen victim to six offences – most often fraud.
In almost 60% of business fraud cases, employee insiders were involved. In a third of those cases, they’d act alone, while one in four would collaborate or connive with outside criminals. Almost half the losses of £80 million or more could be traced back to internal perpetrators.
The truth is clear: Insider fraud can often cause massive losses, even if many company directors don’t like to admit it.
That’s not to say that directors don’t recognise the danger – it’s just that we often think it’s other companies who‘ll always be the victim. That: “It could never happen to us.”
That’s because fraud is often perpetrated by insiders who blend in so well, who are so quiet, that in hindsight you’d wonder how you missed the signs that they’re too good to be true.
Typical fraudsters tend to share certain motives—a gambling addiction perhaps—and and certain personality traits such as greed. They find and exploit loopholes in the system, which means companies have to be proactive to prevent crime. Because nothing creates thieves like opportunity.
Finding the right balance between a trusting, welcoming corporate culture on one hand and stringent business fraud prevention and controls on the other is often like walking a tightrope. But it’s in this balance where you’ll find the best chance of keeping damage to a minimum.
After all, there are bad apples everywhere.
In this series of articles, you’ll discover who these bad apples are, see the damage they’ve been able to cause, and learn just how you can protect your company from business fraud. Let’s begin.
The impact of business fraud: How white-collar crime affects businesses
When it comes to white-collar crime, the numbers don’t lie
“Everyday crimes” like fraud, embezzlement or theft and misappropriation of funds cause massive losses to companies across the UK every single year. But white-collar crime—and the threat of inside perpetrators—are often underestimated in companies’ risk assessments. That complacency can backfire. The numbers prove it.
Preventing losses from business fraud: Loss statistics from Allianz Trade
The highest losses due to fraud are caused by criminal employees
Losses due to external criminals have increased steeply in recent years. Ten years ago, around three quarters of cases were still caused by insiders. That share has dropped to just 57%. But while their share is dropping, their impact isn’t. In-house criminals still account for 73% of all losses due to fraud.
Incidence of losses due to business fraud
The number of cases of business fraud—both internal and external—has risen steeply in recent years. However, cases of external fraud are rising much faster, with over 40% more cases than five years ago.
The amounts lost to business fraud show a similar rise. Insiders still cause the greatest losses overall, but external criminals are beginning to catch up. The amount of money lost to external fraud has risen by over 50% – much faster growth than losses to insiders.
The most frequent insider crimes
Protect yourself against the risks of business fraud and the impact of financial losses
Even the most stringent security controls and the most supportive corporate culture won’t completely eliminate the risk of business fraud. Make sure you’re always protected against financial losses through dishonest, fraudulent, malicious or deliberate criminal acts with our comprehensive fraud protection cover.
We’re here to answer all of your questions, whether you’re an Allianz Trade customer or not.
UK customers can call us on 020 7860 2063, or visit our dedicated fraud page to learn more.
Footnotes
External references:
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