Four ways to mitigate the risk of fraud and financial crime within your business

Running a business comes with many risks, but you may not expect fraud and financial crime to be among them. However, data shows the rise of cybercrime and identity fraud is continuing to affect businesses globally, largely driven by the development of artificial intelligence (AI) technologies. In the United Kingdom alone, 70% of leading professionals stated they expect financial crime to increase in the next 12 months.

Though it’s easy to assume these risks only apply to large corporations working in financial, telecommunications, and mining sectors, SMEs are also vulnerable to the increasing sophistication of AI-powered scams, due to their lack of training and inability to spot fraudulent activity. 

In this short guide, we explore four ways to mitigate the risk of fraud and financial crime within your business, no matter its size. 

Run regular risk assessments

A risk assessment allows you to analyse the current state of your business and identify any weaknesses or potential threats before they materialise. Begin by identifying all areas of your business which are the most vulnerable to fraud or financial risk, keeping in mind the current trends and emerging threats to your specific sector. 

It’s crucial that you thoroughly understand all of the various components of your business to accurately complete your risk assessment, from your internal communication channels to the credentials of the companies in your supply chain. Having a clear single customer view (SCV) and a solid understanding of Know Your Customer (KYC) verification processes, you can also ensure all the people who interact with your business from an external standpoint are legitimate and safe.

Invest in quality training

It’s not enough to assume all of your employees are savvy enough to avoid clicking on a fraudulent link or sending sensitive information in reply to a phishing email. As cybercrime continues to develop and become harder to spot, it’s essential that as a business owner you invest in quality training to ensure the protection of your assets and finances.

You could host a seminar, run fraud-detection quizzes, or set up yearly mandatory training. Whichever method you choose, this is a powerful opportunity to strengthen your workforce and ensure everyone is on the same page when it comes to knowing how to spot suspicious activity and prevent scams from targeting your business.

To ensure compliance, your policies should protect your employees and encourage them to report suspicious activity – without fear of retaliation or prejudice. Scammers can be meticulous and very difficult to spot, so it’s important to foster a culture of trust and transparency where each individual feels comfortable and empowered to speak up if something doesn’t feel right.

Reassess your internal controls and procedures

Prevention against fraud and financial crime is not a one-person responsibility, so you need to ensure that no single individual has control over all aspects of any transactions or processes. With more eyes on each moving part of your business, suspicious activity becomes more likely to be flagged before it has the chance to devastate your entire organisation. 

You should limit access controls based on role and need-to-know principles, and implement robust security measures for all of your employees who handle financial transactions or data. This way, you’ll have a clear picture of who is in charge of the most important and sensitive financial information for your business. 

Use fraud-detection technology

Depending on the size of your business, and the sums you manage or exchange, it may make sense for you to invest in anti-fraud technology. Fraud detection or anti-money laundering (AML) software can scan potential customers for suspicious data, verify their identities, and help you comply with AML laws. This makes it harder for scammers to make fraudulent purchases and also puts you in a better position to manage growing demand and increasing volumes of financial transactions. 

Some technologies can be integrated into your internal processes to scan your transactions in real time, flagging anything untoward and helping you take action before it escalates. If you use any AI-powered tech, be sure to input accurate data in large enough quantities for it to work efficiently. You’ll also need to run regular audits to ensure the data remains accurate, reliable, and unbiased. 

Moving with the times

As a business owner, you have a responsibility to stay up to date with emerging technologies and trends in fraud and financial crime. As scammers take advantage of AI and other innovative tech to slip past outdated security protocols, you need to be ahead of the game to ensure the longevity of your business. If you work internationally, stay aware of any weaknesses in security that can emerge as a result of geopolitical events – illicit activity tends to rise in times of political instability and war. 

By implementing these measures, you can help to mitigate the risk of fraud and financial crime in your business. Stay aware, train your staff effectively, and make use of data to create a robust and protected foundation for your growing business.