What is fraud

Fraud is a financial crime where someone takes money by tricking someone into giving away information or performing an action that leads to loss. For example, someone pretending to be your bank in an email and getting your login credentials so they can drain your account.

Another word for fraud is deception. Fraud and online fraud are usually used to describe digital financial crimes.

Defining fraud

Fraud can be succinctly defined as a deceptive financial practice wherein perpetrators manipulate individuals into divulging confidential information or performing actions that result in financial losses. For instance, an email impersonating a bank may trick recipients into providing login credentials, facilitating unauthorised access to their accounts.

What is invoice fraud?

There are several types of invoice fraud. One of them is when a company, for example, sends out thousands of invoices without any basis and hopes that someone will pay. In that case, nothing has been bought or sold.

Another variation is sending out purchase contracts that have not been agreed upon, or simply sending out goods to someone who has not ordered them and demanding payment for them. Others have also experienced being signed up for subscriptions for things like detergents without having requested it.

A particularly sneaky form of invoice fraud is VAT fraud. There are sent out fictitious invoices, often from foreign companies to complicate tracking. This scheme seeks to exploit VAT deductions for transactions that never transpired, deceiving authorities and extracting money illicitly.

How to protect your business from fraud

Prevention is paramount in safeguarding your business from the pervasive threat of fraud. Never disclose sensitive information like bank information, even to legitimate entities such as your bank. Exercise caution when dealing with unfamiliar invoices, emails, messages, or unexpected phone calls. Vigilance is key to thwarting fraud attempts.

Moreover, consider the following protective measures:

  1. Verify Invoices: Only pay invoices from known and trusted sources.
  2. Question unexpected communications: Scrutinize emails, messages, and phone calls that deviate from your usual communication patterns.
  3. Password hygiene: Strengthen your business’s defenses by employing unique, robust passwords and refraining from using the same password across multiple platforms.