Fraudsters stole £42.6 million from businesses in the first six months of 2023; all Authorised Push Payment fraud – where victims are tricked into sending money into an account controlled by criminals.
This is a startling figure underlining the fact that no business is immune to fraud.
Fraud currently accounts around 40 per cent of all crime in England and Wales. It poses a significant threat to organisations, in particular smaller companies who don’t have the budgets and dedicated fraud prevention teams of many large corporations. Additionally, in a digital world, it’s no longer solely about keeping physical premises safe, there’s the significant cybersecurity threat that business leaders must now consider too.
While it can be difficult to compete with the resources that large organisations have, it doesn’t mean small businesses cannot successfully fend off criminals. Many do this extremely well when they prioritise fraud prevention, equip employees with essential skills to detect and report threats and enhance measures and controls to mitigate risks.
Understanding fraud in small businesses
Cybercriminals will always try to exploit weaknesses such as outdated software, lack of employee training, and inadequate fraud detection systems. Common types of digital fraud affecting small businesses include:
- Phishing attacks – Deceptive emails, messages or even websites designed to trick employees into revealing sensitive information, such as passwords or financial details.
- Ransomware attacks – Malicious software that encrypts business data. In response, criminals will demand a ransom for decryption.
- Payment fraud – Fraudsters using stolen credit card information or fabricating invoices to steal money from businesses.
- Identity fraud/theft – Using stolen business credentials to impersonate owners or employees, gaining unauthorised access to sensitive systems.
- Insider threat – Dishonest employees can manipulate digital records or steal customer data for personal gain.
Given these threats, small businesses should develop robust strategies built around digital literacy and fraud prevention.
The role of digital skills in fraud prevention
- Recognising and avoiding scams
One of the most effective ways to prevent fraud is educating employees about common scams. Training staff to recognise suspicious emails, fake invoices, or unusual login attempts, for example, helps mitigate phishing and social engineering attacks. It doesn’t have to be time-consuming either – short, engaging, accessible and interactive content that complements an employee’s workload and empowers their skillset can prove to be pivotal when strengthening understanding, so staff know how to detect, report and stop fraud at source.
Digital literacy skills such as verifying sender information, checking website URLs for legitimacy, and recognising red flags in communications are also essential for fraud prevention.
- Implementing strong cybersecurity practices
Digital skills empower small businesses to establish and maintain robust cybersecurity measures. Essential practices include:
- Using strong passwords – Encouraging employees to create complex passwords and use password managers.
- Enabling Multi-Factor Authentication – Adding an extra layer of security to sensitive accounts.
- Regular software updates – Keeping operating systems, applications, and antivirus programs up to date to patch vulnerabilities.
- Secure data storage – Using encrypted cloud storage solutions to protect sensitive information from unauthorised access.
- Safe online transactions and financial management
Small businesses often conduct transactions online, making them susceptible to financial fraud. Digital skills in financial management, including verifying payment sources, recognising fraudulent transactions, and securely handling customer payment data, all help prevent cyber fraud.
Business owners should ensure their team understands how to identify secure payment gateways, the importance of reconciling financial records regularly and how to detect anomalies in financial transactions.
- Employee training and cyber hygiene
A well-informed workforce is the first line of defence against threats. Ensuring employees regularly update passwords, are cautious when downloading files and applications, and maintain secure browsing practices further safeguard workforces.
Additionally, having awareness of manipulation techniques that criminals use is key. For example, staff who receive communications with urgent requirements should take a moment to stop and think. And it’s important to never divulge personal information or part with money before getting a second opinion from someone they trust.
Further ways employees can protect themselves, their colleagues and organisations include avoiding clicking on links or opening attachments from unsolicited SMS or emails. A good tip to remember is, if something seems too good to be true, it probably is.
- Leveraging fraud detection tools and software
Modern fraud prevention tools use artificial intelligence and automation to detect and mitigate risks. Small businesses with digital skills can maximise the benefits of such systems to help them monitor transactions and detect suspicious patterns, receive real-time alerts about potential threats, and enable verified and encrypted payment gateways to combat financial fraud. Integrating these tools effectively into operations, can further enhance preventative measures and controls.
The connection between digital skills and fraud prevention in small businesses cannot be overstated. In an era where fraudulent threats are increasingly sophisticated, equipping business owners and employees with the right digital competencies is crucial for safeguarding assets, customer data, and financial integrity.
By recognising scams, implementing robust cybersecurity practices, training employees, and leveraging fraud detection tools, small businesses can build resilience against fraud and maintain a secure operational environment that ultimately keeps employees and customers safe.
Rachael Tiffen is Director of Learning and Public Sector at Fraud Prevention Service, Cifas
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