What is Commercial Financial Crime Insurance?
Commercial Financial Crime Insurance can protect your company against direct losses that could occur due to the theft of money, property and other valuable assets, whether by a member of staff or a third party. Computer fraud, forgery of important documents and damage or destruction of property are other ways you could be hit.
With statistics showing that almost a quarter of UK SMEs have been affected by fraud, dedicated Financial Crime Insurance can provide better protection from both internal and external fraudulent activities than other policies that cover employee dishonesty.
Why do you need Crime Insurance Cover?
Within any business, even one employing just a handful of staff, there is always a risk that an individual could engage in fraudulent activity in order to steal money or property.
It can understandably be difficult to accept that a member of your team may be engaging in such activities. However, the fact is that it is often the most trusted, senior staff who know how to bypass security systems and avoid suspicion until it is too late.
One example is what is known as Employee-led fraud. This is when an employee conspires with a supplier or customer to create invoices and payments for goods or services not actually supplied; sharing the monies fraudulently received between them.
Another way businesses can be targeted is through what is called ‘Fake President Fraud’. This is where someone pretending to be a senior figure within an organisation contacts the finance department asking them to make urgent or unusual payments. Requests may be made by phone or email and in some cases the company’s email system will have been hacked so the fraudsters can make requests from a legitimate address.
The most common fraud, that is targeted at SMEs is Mandate Fraud, where third-party fraudsters claim to be a legitimate supplier and ask your finance department to amend their bank details. Payments made into this new account are then stolen by the fraudsters, rather than being received by the supplier as expected.
Examples of the different types of targeted financial crime:
Employee Dishonesty – In 43% of cases the employee acts alone to perpetrate the fraud.
Real Life Example: One of our nursery clients
A member of nursery staff falsified children’s attendance records so that it appeared child X only attended 3 days, when in fact they had been attending nursery 5 days a week. The staff member then kept the parent’s payment for the two days the nursery were not aware of, pocketing £3k a month which added up to at least £70k by the time they were caught and arrested.
In 32% of cases an employee and individual outside of your business act together to commit fraud.
Real life Example: Staffing Agency
An employee at a staffing agency providing temporary nursing staff to the NHS, encouraged the nursing staff to submit falsified and fraudulent timesheets. He then paid the staff for the shifts on their timesheets (the shifts they hadn’t worked) and then was paid a kickback by the temporary staff.
The total cost incurred by the NHS was £72, 991
Mandate Fraud – SMEs are losing £9bn through invoice fraud every year.
Real life Example: Restaurant
The restaurant owner orders his wine as usual through his normal supplier. He then gets an invoice for the wine, it has the suppliers’ letterhead and look like it has come from a familiar email address. Rather than checking the bank details the restaurant has on file for the supplier, the owner quickly makes a payment to the supplier using the details on the invoice. However, this invoice is a fake and the owner has actually paid fraudsters, resulting in a loss of around £3,000.
What does Financial Crime Insurance cover?
These are just some of the ways your business could be affected by criminal activity and staying ahead of the fraudsters can prove difficult. Yet with the right level of Commercial Crime Insurance, you can rest assured that if your company is targeted, you would not be alone. Things your Commercial Financial Crime Insurance may cover include:
- Your businesses’ own money, securities and property plus that belonging to third parties which you are responsible for
- The costs of defending third party accusations of employee dishonesty – this may include unfounded allegations which can be costly, time consuming and disruptive
- Access to a choice of specialists to investigate and resolve claims successfully
Who needs Financial Crime Insurance?
Commercial Financial Crime Insurance is suitable for businesses of all types and sizes. However, in our experience SMEs are often the most at risk, as they may not have the same levels of security in place as bigger companies.
Talk to Stanmore the insurance people about Commercial Crime Insurance now – call our team on 01204 570 370