Small businesses that continue to use old-fashioned filing methods are leaving themselves open to identity fraud and significant financial losses, a report has revealed.‘Keeping the Record Straight,’ published by the software company Digita, claims that fraudsters are targeting the continuing policy of Companies House to accept corporate information to be filed on paper forms.
Criminals exploit this ‘loophole’ to file fake papers to change the address, contact details or names of directors of a limited company.
The fake documents have a veneer of authenticity because they appear on the official public record, and are used by the criminals to carry out a range of illegal activity – from obtaining goods on credit to disposing of company assets.
The Metropolitan Police estimates that a single filing fraud could cost as much as £1m, seriously damaging the business that falls victim. Small businesses in particular would be ruined by such costs.
However, by adopting modern filing methods, businesses can avoid being caught by the fraudsters, according to Ian Manson, report author and head of company secretarial software at Digita.
“Companies can instruct Companies House to only accept changes electronically via the new PROOF scheme, which uses secure passwords for access. If more businesses shifted to submission of data by PROOF, the opportunities for fraud would diminish rapidly," advised Mason.
High standards of vigilance and the use of company secretariat software were also identified as ways of avoiding the crime.
The report found that since April 2005, there has been an average of 50 instances of company filing fraud per month.
© Crimson Business Ltd. 2006