In this article, we’ll be discussing how a business might be accused of fraud, as well as the consequences that may follow…
In the UK, fraud is costing businesses and individuals £137 billion each year. While this statistic may seem chilling, there is a lot companies can do to prevent fraud from taking place.
The first step to protecting your business is to familiarise yourself with the different types of fraud and the consequences of such action. These consequences could include anything as final as a criminal prosecution, to something a bit more forgiving, like a no further action letter.
To get a wider scope on the different types of fraud, as well as learn some of the consequences that may follow, read on…
How Might a Business be Accused of Fraud?
Below we’ll be discussing some of the different types of business fraud. Take a look…
- Insurance Fraud: this is where a business may file fictitious or exaggerated claims for an insurable event, such as a burglary or fire in a company building.
- Identity Fraud: this is an illegal impersonation of a business in order to utilise their financial resources illegally.
- External Fraud: businesses can fall victim to external sources of fraud via phishing attacks and spam emails.
- Billing Fraud: this includes deceptively reporting expenses in the hope of financial gain.
- Tax Fraud: this is where companies falsely report incomes in order to reduce tax liabilities.
- Accounting Fraud: this is where a company will falsely report their profits, income, and expenses to mislead investors.
What Happens if Your Business is Accused of Fraud?
Now we’ve familiarised ourselves with some of the different types of business fraud, let’s take a look at what might happen if a company commits it…
Depending on the type and severity of the fraud committed, it is possible for an individual to face criminal legal action where the company itself may be prosecuted for corporate crime. Fraud convictions bring with them the serious possibility of a fine or prison sentence.
Regardless of whether the fraudulent activity was external or internal, fraud can make clients and investors lose confidence in the integrity of a business. Generally speaking, people are much less likely to want to do business with a company that has fraud in its history, and this can ultimately decrease reputation in the sector.
Loss of Loyal Customers
For customers, fraud can be a fairly traumatic experience if they felt they were deceived or misled in any way. Because of this, it’s likely customers will have less confidence in the business and may cut ties.
Similarly, it may be hard to reach new customers if your reputation has suffered as a result of the fraud. Customers may have serious concerns over the integrity of your business or may not want to be associated with a business that has a history of fraud.
Loss of Employees
After a fraud is committed, a company may find its employees no longer have confidence or faith in the business. They may also be concerned about their own reputation and not want to be associated with fraudulent activity. As a result, employees may decide to seek work elsewhere, which can increase the financial strain on the business.
Not only may the company incur legal fees for fraudulent activity but, due to the reputational damage, a lack of customers and investors can have a huge financial impact on the business.
Depending on the severity of the fraudulent activity, the business can face huge fines from public bodies such as the ICO.
After a fraud is committed, it is likely morale within a company will reduce. This can lead to a decline in employee productivity, a lack of trust in superiors, and an overall lack of confidence in employee capabilities. This could have a knock-on effect on the business, decreasing productivity and performance in the company.
No Further Action Letter
In the instance there was insufficient evidence to prove fraud had been committed, a business may receive a no further action letter. This is where the police have made a decision not to charge the company and the investigation will be closed.
Fraudulent Activity in Businesses
As we’ve made clear in this article, the consequences of fraudulent activity within a business are huge and can impact everything, from repeat customers to company morale. From financial losses to reputational damage, it’s important to have the correct procedures, training, and systems in place to avoid fraudulent activity from taking place.
For more information on how you can prevent business fraud, speak to a business advisor or a criminal defence solicitor.
Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained legal professional. Be sure to consult a criminal defence lawyer/solicitor if you’re seeking advice on commercial fraud. We are not liable for risks or issues associated with using or acting upon the information on this site.