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Fraud: How to Recognise The Warning Signs

Small and medium-size businesses can be vulnerable to fraud. To discover just how common the issue is and to highlight how the UK’s 5.5 million SMEs can protect themselves against fraud, Slater and Gordon have commissioned research with 500 SME owners and managers. 

In a series of fraud-related blogs, we are examining the law and offering advice to businesses about how to best safeguard themselves.

SMEs lose money to fraud all the time with one in six SMEs affected by civil fraud in the past year.

That is why we have compiled a list of fraudulent activity warning signs to help managers and owners of SMEs to recognise the tell signs so you can protect your business from losing money.

Fraud Warning Signs:

  1. Impossibly High Returns on Investment – If an investment seems too good to be true it probably is. Promises of a dramatic increase on an investment should be questioned.

  2. Lump Sum Payment Incentives – Fraudsters often offer incentives of lump sum payments after the completion of a transfer, only to take the money you transfer them and take off. If you come across the offer of a lump sum payment in return for a transaction it should set off alarm bells in your head.

  3. Mass-Marketing Techniques – This is when a fraudster contacts you to try and sell you a product or service which they either don’t have or is of a low quality, lower than that which you would expect. It can come in the form of an email, letter or phone call. Beware of companies you don’t recognise getting in touch with you and trying to sell you goods or services.

  4. Cold Calling – One of the most popular mass-marketing techniques for fraudsters is the cold call.

    Cold calling is not just limited to fraudsters ringing up out of the blue and trying to sell you goods or services as a made-up entity. There are dishonest companies out there pretending to be trusted businesses and one of their techniques is to leave fake invoices. Action Fraud estimates that 675,000 businesses have paid out money on a fake invoice – it is crucial that you know your suppliers and look out for fake invoice scams.

  5. Suspicious Activity – Suspicious activity can be anything you notice which is out of the ordinary. Look out for unusual money transfers such as funds being transferred from pension schemes to third party companies or trustee personal accounts as well as being overcharged.

    Suppliers overcharging for products or services can happen at any point in a business relationship, it doesn’t matter if you have done years of good trading with them, you should remain vigilant in case either a fraudster starts pretending to be them and charging more for their services or if one of your employees colludes with the supplier and allows them to intentionally overcharge your business for their goods and services.

Slater and Gordon Lawyers act for SMEs who have been victims of fraud. Contact our business dispute resolution lawyers on 0800 916 9052 or contact us online.

Craig McAdam is a dispute resolution lawyer with expertise in financial regulations. He works from our Manchester office.

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