SMEs at Risk of Corporate ID Fraud

SMEs at Risk of Corporate ID Fraud

More than a fifth of small companies are leaving themselves exposed to corporate identity theft due to lax security procedures, financial insurance firm CPP has warned.

A CPP survey of 500 small companies in February this year found that 22% said that they could be vulnerable to corporate identity theft due to lax security procedures, while 34% said they do not understand what corporate identity theft is. 

Corporate ID fraud typically involves a fraudster changing company directors’ details or the registered office address by submitting false documents to Companies House, using information they have obtained about the business.

CPP spokesman, Eoghan Hughes, said that firms’ susceptibility to corporate ID fraud is both due to the business failing to put secure systems in place which allow fraudsters to access company details, and loopholes in Companies House’s system when a company registers.

“Small firms are putting themselves at risk by not implementing stringent enough data protection systems, not encrypting data, and allowing employees to have access to sensitive information.”

“There are also loopholes in Companies House data processing. It’s not possible for them to check the validation of all the paper documents they receive.”

“Firms should regularly check with Companies House that the details they store are accurate, or enrol for the more secure PROOF scheme, which is an electronic filing system,” added Hughes. “If they receive any calls claiming to be from Companies House, they should report it immediately, as Companies House never contacts customers directly.”

CPP’s survey also found that two% of small companies have fallen victim to corporate identity fraud, costing them on average £13,500 each. These costs accrue when fraudsters spend money on credit or debit cards applied for through the company’s name, order goods without authorisation or withdraw funds from their accounts.

Only one in ten respondents has signed up to the PROOF scheme offered by Companies House, which allows companies to file their documents more securely on an electronic system.

Companies House said that under the Companies Act 2006, its statutory requirement is to carry out a basic check on documents when companies register, but to make them available to the public.

“However, we provide companies with a way to protect themselves, by registering with the PROOF scheme, which costs £15 a year,”

said a Companies House spokeswoman.

“Companies filing electronically must use authentication codes used only by authorised users, meaning that Companies House knows electronically filed information has come from an authorised source.

“The service also notifies a company each time a document is filed on its record. The company can take prompt action in cases of false filings.”

For more information on protecting your firm against corporate ID fraud, visit the Companies House website.

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