Business Credit Card Fraud - How bad a problem is business credit card fraud?

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Is Business Credit Card Fraud A Problem?

Understanding the scale of business credit card fraud is not an easy task. There are a number of reasons for this, but there are two major ones.

Firstly, many businesses will have one or more employees within the firm that are interested in committing such crimes. When someone on the 'inside' who knows and understands the processes of the company works around and avoids those processes, it can be very difficult to trace.

Your author has some personal experience of theft within a business. The thief was a partner! He took it upon himself to intercept bank statements and invoices to hide his deception for as long as possible. He also accepted cash for some services that we did not accept cash for and pocketed the money while disposing of our internal receipts. With such an advantage, it was very difficult to spot for some time. Therefore, it was also very costly.

The ultimate result, and this may be the situation for many small businesses, was the business could not survive. It simply ran out of money much earlier in the start-up phase than was expected.

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A second reason that makes business credit card fraud difficult to spot is that much of it appears in the guise of invoices that appear to be legitimate. There are a great many fraudsters that will submit invoices to medium sized and large businesses for payment. They may do this as an individual or as a corporation. In many larger firms, the process of ordering goods or services, accepting delivery, using them and paying for them can be handled by many different departments and people. With such potential for confusion, many fraudulent invoices are paid each year for which there is no corresponding service.

A third reason for problems also comes from the potentially high number of credit cards that a company may have in issue. As relevant Directors, Managers and Departments gain their own cards, the potential for problems rises. Quite simply, more cards creates more opportunity for them to be lost, stolen or the card information copied.

This is sometimes simply a cost of business. In many firms - especially retail - the loss of goods due to theft or expired dates (food mostly) is called shrinkage. Yes, it even has a name.

As you might imagine, it is not in the interests of many companies to announce the losses they suffer from theft and fraud. For many criminals, it would indicate that they are an easy target and thus increase their problems. For larger companies (quoted on the stock market) an admittance of large theft and fraud problems could cause investors to lose confidence, sell and have a negative impact on their share price.

A great example of a large scale fraud that uses businesses but actually defrauds the taxpayer is called 'carousel fraud'. This link shows a little of the scale. In total, carousel fraud between the UK and EU is believed to cost multiple billions of euros each year!

When there is potentially so much money being scammed, it is hard to imagine that it isn't happening...

With such difficult obstacles to overcome, prevention of frauds and thefts against businesses are not easy.

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It is worth noting that most members of upper management in large organisations rely on looking as though the business is 'being managed'. In other words, things are under control. Any admittance of a theft or fraud problem does not help to maintain that impression and so potentially puts their position at risk. Any loss of control is a difficult subject to announce.

We hope that this explains some of the background to this rather tricky subject!