Fri, Oct 13, 2023

A “New” Era of Impersonation Fraud

Fraud remains the most common type of crime experienced by victims in England and Wales, costing the UK billions of pounds every year. The Crime Survey of England and Wales revealed there were 3.7 million incidents of fraud in England and Wales in 2022 and £2.46 billion lost by businesses and individuals to fraud in the fiscal year 2022. Fraud monitoring is also the most commonly used financial crime tool — 91% of individuals surveyed in Kroll’s 2023 Fraud and Financial Crime Report utilize fraud monitoring tools. Despite this, in any situation where there are control policies in place to avoid losses, fraud, and other types of malfeasance, there will always be gaps. These can include human error or technical glitches, and fraudsters are constantly looking for weaknesses. Fraud is an incredibly broad area, with many different aspects to it, and fraudsters are increasingly taking to more old-fashioned methods. As financial fraud is so heavily monitored now, an area of fraud that is gaining momentum involves the physical trade of goods, which can be difficult to trace. Increasingly, we see frauds involving impersonation — or “spoofing” — that use deception to acquire physical goods rather than money.

Types of Fraud

Fraud losses are attributed to many factors, including:

  • Digital controls failure, where a computer fails to recognize illicit activity
  • Employee wrongdoing or human error, where an employee is complicit in a fraud or fails to recognize fraudulent activity such as phishing attempts, “spoofing” or scam emails
  • Illicit trade of goods, where products are sold where they shouldn’t be — whether they are counterfeited, stolen or diverted from their planned route


Taking the “Old - School” Approach

For many years we have seen fraud focused on money. Such frauds could involve business email compromises, romance scams or “spoofing”. More recently, however, we have seen an anecdotal shift from fraudsters. While they do still target money, there is a rise in fraudsters targeting physical goods. This shift has most likely occurred because financial transactions can be traced but goods can’t as easily. With this type of illicit activity, fraudsters may pretend to be potential customers. They may use digital means such as fake emails and websites to confuse and defraud victims into sending products to a different location than planned, often with forged documents that make the fake customer appear more credible. Another method, according to research from TT Club, is carrier fraud, in which criminals imitate haulers and other subcontractors, including drivers, with falsified documents. This method accounted for 84% of TT claims involving fraud or deception in 2022. It appears that evolution of fraud has taken a sideways step, and with most companies carrying out mandatory compliance training to tackle more modern instances of financial fraud, there is less awareness of physical goods fraud among businesses. The fraudsters are reacting accordingly, in targeting physical goods and cargo with impersonation frauds, they have pools of potential victims in both the suppliers and the transporters.

How Can Businesses Protect Themselves Against Impersonation Fraud?

Unfortunately, no individual or business will be 100% fraud proof. It is vital to remember that if something looks or sounds too good to be true when it comes to a new physical goods deal, it probably is. Firms should remember to carry out rigorous and advanced due diligence and not stop at just a standard credit check. Keep an eye on communication. Fraudsters will often not engage via video calls and will give last-minute excuses to avoid meeting. Always double-check the sender’s email address against the organization’s standard email address format. When in doubt, independently find a main switchboard phone number for the company and call them. It is also important to have robust controls regarding deliveries, ensuring that products are collected and delivered as agreed and that reputable logistics companies are used where possible.

Tackling fraud requires a combination of using good common-sense practices and seeking out an expert where required. Collaborating with a reliable and trustworthy third party can help businesses investigate, uncover and remediate different types of fraud. Such collaboration also gives businesses a team of specialist, experienced investigators ready to support at any time.

Forensic Investigations and Intelligence

The Kroll Investigations, Diligence and Compliance team are experts in forensic investigations and intelligence, delivering actionable data and insights that help clients worldwide make critical decisions and mitigate risk.

Investigations and Disputes

World-wide expert services and tech-enabled advisory through all stages of diligence, forensic investigation, litigation, disputes and testimony.