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Commercial Crime

You’ve known your Finance Controller for years. She’d never steal from you. Right?

It is a sad fact that commercial crime cover is increasingly becoming a necessity for businesses of all sizes. Recent statistics show that, 37% of all companies surveyed state that they have experienced an incidence of  fraud. This doesn’t just impact larger companies – 24% of smaller businesses (SME’s) have also experienced a fraud.

Surveys tell us that between one half and three quarters of all frauds derive from your own employees.  Worryingly, 87% of such frauds involve long standing employees who have worked for you for more than 2 years. 

Businesses can provide themselves some protection through a strong corporate culture with embedded systems of check and control – this will help to detect and counteract fraudulent activities. But there will always be incidents that are beyond management influence: the ‘unknown unknowns.’

In order to improve protection against losses, businesses should consider insurance cover. 

A Commercial Crime policy will help protect your balance sheet should you be impacted by a fraud.

Sources - The PWC Global Economic Crime Survey 2014; The National SME Fraud Segmentation Report 2012

Commercial Crime Cover

Techinsure know that each customer is different and will work with you to ensure your commercial crime cover is tailored for your specific requirements, with cover limits and excesses shaped around your demands and needs. It is essential in our eyes that the policy provides cover for loss by “any party” meaning you are covered for theft by anyone – whether an employee or not.  

The policy can also be extended to include: 

  • Client cover
  • Expenses incurred to prove loss
  • Criminal Damage Costs
  • Malicious Data Damage
  • Court Compensation Costs
  • Identity Fraud; Commercial Disruption
  • Telecommunications Fraud
  • Public Utilities Fraud
  • Public Relations Consultancy Fees
  • Mitigation Costs

Please speak to us to discuss any of the above in further detail.

Can you afford not to be covered? 

Case study (supplier/purchasing fraud)

The Insured were one of the UK’s largest property management companies involved in various building maintenance and improvement projects. An employee of the Insured in the role of project manager conspired with two external contractors in an invoicing fraud. Invoices were submitted by the contractors for work that had not been done and the employee authorised the payments in return for kickbacks. The loss to the business was a little shy of £2m. The fraud occurred over a large number of sites and invoices were mixed in with legitimate invoices making the quantification of the loss difficult. Insurers were able to agree a series of interim payments as each phase of the loss was quantified, thereby minimising the impact on the Insured’s business.

Supplier fraud (which usually involves collusion) is on the increase. It can go on for a long time without being detected and result in multimillion pound losses. Companies need a rigorous procedure for vetting and appointing suppliers. The supplier list should be actively managed and appropriate auditing is essential.

Case Study (accounting fraud)

A large local authority discovered a significant fraud perpetrated by a financial controller. The department in which he worked employed over 500 people and was responsible for the provision of various social services. Some of these services were outsourced to local suppliers who received payments for their services. Investigations revealed that the financial controller had amended payment runs and inserted additional fictitious payments to these suppliers, but these payments were made into a personal bank account he controlled. During a five-year period he stole in excess of £500,000. The loss was a significant amount of money for a local authority providing front-line services to vulnerable people. A quick investigation allowed Insurers to pay the loss in its entirety.

A significant proportion of all losses are caused by accounting fraud. Due to the authority levels of the fraudster and their knowledge of accounting systems, they can be difficult to detect. Full segregation of accounting functions should be rigidly enforced and staff rotation should be considered.

Case study (accounts receivable / teeming and lading)

A senior accountant working in the European operations of a global chemicals company had been stealing money from various company bank accounts over a six-year period. He had worked there for well over ten years, was highly trusted and had risen to a senior position in the organisation. He used his detailed knowledge of the accounting systems to process and conceal regular payments into his own account and covered his tracks by transferring money from other company accounts to hide the holes, commonly known as “teeming and lading”. The loss was over €800,000. The claim was paid and Insurers were successfully able to pursue recovery against the fraudster. “Robbing Peter to pay Paul” is the essence of teeming and lading.

Because of their trusted position and system knowledge, fraudsters can be difficult to detect in these circumstances. Suspicious transaction monitoring, surprise audits and job rotation can play a significant role in preventing this type of loss.

The above are real cases – many frauds however are swept under the carpet as many companies do not wish to share the embarrassment of this loss in the wider business community.

Please do not think that this will not happen to you as statistics show that it very likely will. A robust Crime Insurance policy can help to protect your balance sheet from the “unknown unknowns” 

What next?

If you are interested in more information or would like us to provide you with an indication of premium then please do not hesitate to contact us.

Tel: 03330 431 133