Working from home is fuelling fraud epidemic, warn managers
Working from home is fuelling a fraud epidemic, with a growing number of staff falling victim to scams related to their employers.
Research by accountants BDO found almost nine in 10 of mid-sized businesses it surveyed had become victims of fraud in 2022, with average losses totalling £219,000 per firm. More than one quarter of these firms also fell victim to fraud at least twice.
Almost four fifths of bosses blame remote and “hybrid” working practices for putting them at greater risk, BDO said.
Kaley Crossthwaite, the accountancy company’s head of fraud, warned that working from home left employees more exposed to “social engineering” practices used by criminals to lull them into a false sense of security.
For example, a fraudster might regularly call an employee and pretend to be from another division of the business, a foreign branch, or a supplier. After building the relationship over time, the criminal might then use their familiarity to dupe the employee into making a bank transfer or to reveal confidential information.
The risk of these “red flags” going unnoticed is greater when working from home because people tend to spend less time speaking casually to colleagues, Ms Crossthwaite said.
She added: “Since we have started home working, what corporates have experienced is that their systems have been tested in a way that perhaps they weren't before.
“Previously people were sitting next to colleagues, and they would say, 'I've got a question, how should I do this?' Or 'do you know this person?' Or 'have you ever come across this before?'
“People were not working in isolation in the way that they have been, and in some circumstances continue to do even when they're working in a hybrid way.”
Despite the growing risk, BDO found that 66pc of medium-sized companies are planning to cut spending on anti-fraud measures as a result of rising costs.
By some industry estimates, fraud costs the UK economy around £200bn a year.
The Government is in the process of passing into law a new Economic Crime and Corporate Transparency bill, which will give firm’s a responsibility to prevent fraud and could see companies prosecuted if they are found not to have adequate policies in place.
With an economic downturn likely this year, fraud is likely to become more common as companies struggle with debts and insiders become tempted to cut corners, Ms Crossthwaite said.
“Based on what we've experienced before, in times of financial distress such as after 2008, there's often a time lag between the start of financial difficulties and the increase in fraud, but it's definitely cyclical,” she added.
“It's definitely linked to hard times, so you would expect to see that as times get tough, fraud goes up. There's definitely a correlation between the two.”
Businesses who spoke to BDO said the largest share of frauds committed, 35pc, were the result of collusion between someone inside the company with someone on the outside.
That could be through the inflation of contract values or invoices, or other complex criminal schemes, Ms Crossthwaite said.
Some 34pc were committed by company insiders, while 31pc came from outside victim businesses.
There were an estimated 4.5 million fraud offences in the year ending March 2022, a 25pc increase compared to 2020, according to the Crime Survey for England and Wales.