Fraud in Business

July 17, 2025
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Fraud poses a serious risk to businesses regardless of sector or industry. It can cause severe reputational damage and incur high financial costs that can jeopardise the future of a business. Businesses should therefore take all necessary steps to prevent fraud from occurring thereby protecting their staff, their customers and their business as a whole from the ramifications of fraud. 

In this article we will outline what fraud prevention is and why it is so important. We will also explore how you can protect your business against fraud. 

What is Fraud Prevention? 

Fraud is any activity that uses deception to achieve a gain. It is a prevalent issue in the UK and it accounted for almost 41% of all crime in 2024 alone. There are many different types of fraud and these will be explored later in the article, however the Fraud Act 2006 identifies three main types of fraud which most forms of fraud fall under. These are:

  • Fraud by false representation – this refers to when a person dishonestly makes a false representation as to fact or law, with the intention of either making a personal gain or causing a loss to another person. 
  • Fraud by failing to disclose information – this refers to when a person dishonestly fails to disclose to another person information which they are under a legal duty to disclose, with the intention of either making a personal gain or causing a loss to another person.
  • Fraud by abuse of position – this refers to when a person dishonestly abuses their position to safeguard the financial interests of another, with the intention of either making a personal gain or causing a loss to another person. It still constitutes fraud even if it was a person’s inaction or omission rather than an act. 
Someone accessing bank details on the computer

Businesses are often subjected to one of the following types of fraud:

  • First-Party Fraud – This occurs when a person knowingly misrepresents their identity or gives false information for personal gain. For example, a customer may knowingly buy an item online and then claim that it never arrived or that they never placed the order so that they get a refund from a card provider. Cifas’ Fraudscape 2025 found that 48% of adults believe that it’s ‘reasonable’ to commit some form of first-party fraud. 
  • Second-Party Fraud – This occurs when a person knowingly gives their identity or personal information to another person with the intention to commit fraud. One of the most common examples of second-party fraud is money muling. Money muling is a form of money laundering and it is a crime. Money muling happens when someone moves criminal money for others. It involves letting criminals use your bank account, buying or selling cryptocurrency on behalf of a criminal or withdrawing cash to hand over. Cifas notes that 34,476 cases of money muling were reported in 2024. Whilst this is an 8% reduction compared to 2023, it still accounts for 57% of bank account misuse cases filed to the National Fraud Database (NFD). 
  • Third-Party Fraud – This is commonly referred to as identity theft and occurs when an individual’s identity or personal details are used, with their consent or knowledge, for personal gain. It also includes manufactured identities which criminals create using stolen or fake information. 249,417 cases of identity fraud were filed to the NFD in 2024, a 5% increase from 2023.

Fraud prevention refers to the steps that a business takes to prevent fraudulent activity of any kind. The goal of fraud prevention is to protect a business’ financial resources and reputation, whilst ensuring the integrity of all transactions within the business. 

It’s important to note that the growth in technology has made fraud more sophisticated. This can make fraud harder to detect than in the past and means that businesses must have a proactive approach to fraud prevention. This can include measures such as introducing safeguarding processes and using security software to detect abnormal activity and identify potential fraud. 

Why is Fraud Prevention so Important? 

Fraud can cause severe financial and reputational damage to a business. It can undermine their trustworthiness and in some cases cause millions of pounds worth of losses from which a business may never recover. Fraud prevention is therefore integral to preventing this and to protecting a business’ financial resources, trustworthy reputation and overall integrity. Fraud prevention must be proactive in order to be effective and businesses should not underestimate the importance of thorough fraud prevention practices to protect their business. 

As mentioned, fraud accounted for almost 41% of crime in 2024. However, it is largely underreported and the Crime Survey of England and Wales (CSEW) estimates that only 14% of cases are being reported to Action Fraud or the police. This can make it hard to quantify the damage that fraud can have which makes some businesses lax in their approach to fraud prevention. It’s imperative that businesses fully understand the damaging potential of fraud so that fraud prevention policies and procedures can be implemented and consistently followed. 

A man looking distressed working on his laptop

Below you will find some statistics regarding the prevalence of fraud and the damage it can cause. 

  • Over 421,000 cases of fraud were reported to the National Fraud Database in 2024.
  • In 2022/23 a third (32%) of businesses suffered a cyber breach or attack. These breaches and attacks were often used to impersonate senior members of staff and to request money or to create fake documentation. 
  • It’s estimated that the private sector loses £157.8 billion a year due to fraud.
  • A 2024 survey by BDO found that asset recovery is incredibly difficult and only 58% of businesses expect to recover less than 10% of their fraud losses.
  • 57% of Insider Threat Database (ITD) cases filed by organisations were discovered by internal fraud prevention controls.

Fraud prevention helps to prevent, or at the very least reduce, both fraudulent activity and the financial and reputational damage that it can cause. Having the necessary controls in place not only helps to protect your business, it keeps you legally compliant. The Economic Crime and Corporate Transparent Act 2023 introduces the failure to prevent fraud offence. Under the new offence, an organisation is liable if fraud is committed for the organisation’s benefit and the organisation did not have reasonable fraud prevention procedures in place. The offence will come into force on 1st September 2025 and if convicted a business could receive an unlimited fine. The introduction of this offence reiterates a business’ responsibility to prevent fraud, reaffirming the need for a proactive stance on fraud prevention. 

Types of Fraud in Business

No business is immune to fraud and the growth in technology and increasing prevalence of AI has subjected all types of businesses to incredibly sophisticated and multifaceted attacks. It’s also important to remember that businesses can be subject to fraud both internally and externally. Employees and customers alike can abuse their position, their authority and their trust to defraud a business for financial gain. Suppliers and third parties who are completely unconnected to the business can also attempt to defraud a business for their personal gain. 

As mentioned above, there are numerous different ways in which a business can be defrauded. Criminals run hundreds of different attacks and scams and whilst some may appear very obvious and therefore easy to avoid, others can be unexpectedly insidious, flying under the radar until they cause significant harm. Below you will find five examples of fraud that a business may experience. The list is not exhaustive but it highlights the myriad of ways in which a business can be defrauded. 

Procurement Fraud drop down menu

Procurement fraud is any kind of fraud that relates to a business purchasing goods or services. Procurement fraud can occur at any stage of the procurement process from the onset of the decision to procure goods or services, to the completion of the contract. It can include overpricing goods, creating bogus suppliers, falsifying information to secure a contract and delivering goods or services of substandard quality. 

Outsourced Labour Payroll Fraud drop down menu

Outsourced labour payroll fraud, formerly known as payroll company fraud, is the movement of works and payroll responsibilities from a legitimate business to another business. It is part of a wider fraudulent supply chain, known as organised labour fraud, which does not declare or pay the correct taxes to HMRC. Signs of outsourced labour fraud include no online presence or website, irregular payments and no physical presence at the registered office address. 

Invoice Fraud drop down menu

Also known as mandate fraud, Payment Diversion Fraud (PDF) or Business Email Compromise (BEC), invoice fraud occurs when criminals contact a business via email, claiming to be a company or supplier that they typically deal with. They will then request a payment to be made or inform the recipient of a change of bank account details. Criminals will create fake email addresses which are similar to genuine businesses addresses and send over fake invoices to make their scam more credible.

Asset Misappropriation drop down menu

Asset misappropriation fraud involves third parties or employees within an organisation abusing their position to steal. It is also referred to as insider fraud. This type of fraud can be committed by anyone in the business and typically pertains to stolen cash or cash equivalents such as credit notes or vouchers, although it can extend to include company data or intellectual property. Asset misappropriation can include embezzlement, in which accounts have been manipulated and false invoices created, payroll fraud where payments have been diverted to fictitious employees, and false expenses claims.

Investment Scams drop down menu

Investment fraud involves criminals contacting individuals to convince them to invest in a product or scheme that is worthless or does not even exist. Criminals will usually contact people out of the blue with a convincing spiel on why they should invest in a product or a company and how it can help a business if they do so. Once the criminal has received the payment, they cease contact with the victim.

How to Prevent Fraud in Business

Fraud has become increasingly sophisticated and whilst better awareness is an important step in preventing fraud, it’s likely that fraud will only continue to develop in more convincing ways. As such, it’s vital that all businesses have a proactive approach to fraud prevention. All businesses can be subject to fraud however the ramifications are not always equally proportionate. For example, a larger corporation being defrauded will still result in millions of pounds worth of damage, however they are more likely to have the insurance and infrastructure to recoup some costs or spot the fraud before it causes excessive harm. Smaller businesses may not have the resources to purchase additional insurance or to implement dedicated fraud prevention measures rendering the impact of fraud far more catastrophic for them. 

With this in mind, below you will find some tips on how you can prevent fraud in your business. These tips can be scaled according to the size of your business and include options that do not require a steep financial investment. However you decided to go about fraud prevention you must ensure that you do so proactively. Criminals actively seek out gaps in security and lapses in protocols and these are much easier to find in systems that are not reviewed or actually embodied in day-to-day life. It’s therefore imperative that you regularly review your fraud prevention practices, update them where necessary and ensure that all employees are aware of their responsibility to report and prevent fraud. 

Here are 10 top tips to help prevent fraud in your business:

  1. Offer thorough training – Don’t assume that all staff have the same base knowledge and understanding of fraud and how to spot it. Offering high quality training such as High Speed Training’s Anti-Money Laundering (AML) and Financial Crime course will provide all employees with strong foundational knowledge of UK regulations relating to financial crime. 
  1. Have clear policies in place –  Don’t wait till something has gone wrong to implement a policy. Ensure that you have robust policies in place that can be used to identify and prevent fraud before it causes harm. This can also include having a whistleblowing policy in place so that employees can confidently report any suspicions that they may have. 
  1. Be sceptical – If you are being offered something that seems too good to be true, it probably is. Criminals will offer seemingly great products at unbelievable prices to entrap victims. Thoroughly question any deals or opportunities that come across your desk as well as any documents, transactions or information you are given. 
  1. Know your business inside and out – Fraud can easily fly under the radar and there are many anecdotal stories of someone happily embezzling money from a company for years and no one noticing. It’s therefore vital that you know your business inside and out. That includes, the staff you employ, how your business operates, the services you offer and your competitors. Not only does this stand you in good stead for growing your business, it enables you to spot suspicious activity much sooner and act accordingly before it causes significant financial damage. 
  1. Identify vulnerable areas – Test your systems to see how they would cope with a fraud attack. You may decide to run a simulated cyber attack or hire an external company to assess areas for improvement. Criminals are always looking for vulnerable areas and so it’s important that you know how someone might attempt to target you, both internally and externally. This enables you to focus on these areas of concern and implement robust security measures to keep the business safe. 
Employees having a meeting
  1. Take extra care against cyber attacks – As mentioned, technological advancements have made fraud incredibly sophisticated. It would be short sighted to neglect your cybersecurity as once fraudsters have access to your system, the damage they can cause can be limitless. Protect your business technology against attacks and make sure that all of your systems are backed up and your data as secure as possible. 
  1. Understand your finances – This could be encompassed under knowing your business inside and out but knowing your business’ finances is often a larger kettle of fish that requires its own focus. Knowing your business’ finances includes checking the methods of payments, who authorised them and whether those payments were legitimate. This helps you to spot any suspicious activity and makes it difficult for certain types of fraud such as embezzlement and procurement fraud, to go unnoticed. 
  1. Secure and protect your property – Criminals do not need to be in the same room as you to attempt to defraud you, however they can cause even more damage if they are able to physically access your personal property. Ensure that all laptops, computers and smartphones are stored securely at the end of the day and are password protected. Encourage employees to lock away any values, set up two factor authentication and to be mindful of the safety of company property they use outside of the office. 
  1. Know your customers and suppliers – As with knowing your business, knowing your customers and suppliers can help you to spot any requests or transactions that seem out of the ordinary. For example, a representative from a trusted supplier asking you to transfer money to a different account in a name you do not recognise, is cause for concern. This knowledge therefore enables you to identify potential fraudulent activity and act accordingly. 
  1. Always report fraud – You should always report any incident of fraud. Action Fraud is the UK’s national reporting centre for fraud and cybercrime and they provide a central contact point for fraud and financially motivated internet crime. Whilst reporting an incident of fraud won’t turn the clock back and stop it happening, it can help to prevent it from happening to others in the future and lead to the prosecution of those involved.

Fraud can cause extensive financial and reputational damage to a business. Fraud prevention is not only critical to helping prevent this, it is also a legal requirement. Taking the necessary steps to prevent fraud can help to protect your business, your staff and your customers. Any business can fall victim to fraud and the size of a business, whether that be large or small, is not a guarantee of protection. As such, all businesses must ensure that they have thorough and robust fraud prevention measures in place. 

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