Walesbusiness.org

Business crime is a big issue – and SMEs are falling victim to e-crime and must be prepared to deal with the reality of falling victim to this crime and have a strategy to deal with it.

The stark reality is that 64% of businesses fall victim to crime over a twelve-month period, and crime costs each business an average of £13,354 a year. The uncertainty in the financial markets is a concern for many small businesses, and an effective response to tackle crimes that are eating away at our local communities and national economy is now more important than ever.

Crimes targeted against small business are on the rise. Crime affects a business’ ability to meet customer deadlines and attract customers and adversely affects its profitability, ultimately resulting in businesses closing down and jobs and local economies being put at risk.

Businesses, and their staff in the local community, are victims of repeat crime in the form of vandalism, vehicle damage and threatening behaviour. Crimes against business make up a significant 20%, or the ‘Forgotten Fifth’, of all recorded crime in the UK.

It is within that context that it is worrying to note that Fraud and online crime is on the rise and is a growing concern for small businesses particularly in the current economic climate.

In volume terms, instances of low level crime against a business such as vandalism or criminal damage are more frequent, however, the issue with fraud and online crime is that one event can be highly disruptive and even force a business to close.

Small businesses need to take steps to protect themselves but are also relying on an effective response to fraud and online crime from the police, banks and other relevant organisations.

The FSB surveyed its members in 2008 about the issues of fraud and internet crime and it is of huge concern that 54% of businesses have been a victim of fraud or online crime and a significant 26% of businesses are deterred from buying and selling online because of the fear and risk of online fraud and a significant 37% said that phishing emails had been a problem.

15% had been targeted by card-not-present fraud (where card details are fraudulently used for transactions over the phone or internet), and 15% said that IT systems issues (such as viruses, hacking, denial of service attacks) had been an issue.

However, one third of businesses currently do not report fraud or online crime to the police or banks, 23% believe that it would not achieve anything but businesses are positive about the options for improving the response to fraud: 53% want clearer information about how and where to report these types of crime, and 44% want a specifically named contact in their local police force responsible for tackling fraud and online crime.

So what about the costs to the business of online fraud ?

In over half of cases (54%), the cost of online crime and fraud was negligible to businesses. However, fraud also seems to hit businesses between the £500—£4999 bracket (12%), which, over a twelve month period, are significant sums to small businesses.

A significant 29% of businesses have been a victim of card not present fraud where 22% had received a chargeback (most frequently below £1000). 52% think that the bank/payment company should take greater responsibility for the chargeback fee, particularly where authorisation has already been given.

Where it is relevant to their business, 13% are implementing the Payment Card Initiative Data Security Standard (PCI-DSS) (which ensures that businesses securely store information on their customers and clients) but the most common feedback was that the initiative was not well tailored to small businesses.

With these findings as the background, the FSB produced a policy document last year outlining a response to online crime and fraud against SMEs and made the following key recommendations in relation to online crime and fraud:

1. Businesses need a central, accessible and well-advertised reporting centre for both fraud and online crime to enable them to report these types of crimes in a straightforward way;

2. The National Fraud Reporting Centre and Police Central e-Crime Unit (PCeU) must work hand in hand in order to set up an effective system of gathering intelligence which feeds into investigation and prosecution;

3. Businesses that report fraud would appreciate feedback on how the information is being used to tackle fraud and online crime with information about successes;

4. Businesses are keen to have access to a local police contact on fraud and e-crime to answer queries. There is clearly a need for the National Fraud Strategic Authority and Police Central e-Crime Unit to work on rolling out effective training to all police forces; and

5. All Regional Fraud Forums should devise effective strategies to engage and communicate with small businesses and offer advice on fraud prevention.

We are now on a route out of recession and the recovery is still very fragile. Crime against business is seen in many areas as a soft victimless crime, but as we all appreciate here, that isn’t the case. And it certainly is not the case amongst Wales’ small businesses.

Our SMEs are often family run enterprises, with a small dedicated workforce and so instances of crime and fraud against them hit hard and often lead to significant distress and loss for the business.

And we are ahead of the game in Wales with initiatives such as e-crime Wales which has been groundbreaking and must remain a funding priority for WAG.

So this is why forums such as the one set up by the University of Glamorgan, the Wales Fraud Forum, are extremely welcome and it is why the FSB is pleased to be involved and will do whatever it can to publicise and promote the venture amongst our membership and amongst SMEs across Wales.