Commercial Credit & Collections Conference Review

• Do you believe the increasing requests for payment plans are a result of HMRC’s more aggressive approach and reluctance to grant time-to-pay arrangements?

Brian Lewis, Credit Manager, CPI EuroMix Mortars (BL): HMRC, in some cases yes but it’s probably too late by then but others are recognising their own issues and taking steps to avoid legal action, Albeit slowly.

Kulvir Ranu, Credit Manager at Lavazza Coffee (KR): HMRC’s aggressive approach is increasing the payment plan requests as HMRC almost become the preferred creditor so Businesses want to settle their debt prior to other creditors if they want to continue trading.

• Do you think insurers are part of the economic problem? They reduce limits so companies reduce trade so growth suffers with a lack of normal business risk appetite.

KR: Insurers are playing a part in the economic problems by withdrawing insurance and reducing agreed limits without prior notice, causing businesses to make rash choice on credit lines offered  and raising fear of Trading with the customer within the business environment.

BL: Insurers, in some cases yes but on most policies there is always an element of uninsured customers. It then comes to the insured risk appetite and at what level they will trade backed by a bad debt provision rather than a full cover insurance policy. A mixture of both may be a solution.

• Despite low inflation rates, the current interest rate in the UK is not reducing primarily due to concerns about long-term economic stability surely this it is the issue the current cost of debt, or the availability of cheap debt pre-immediately post Covid, which fuelled heavy borrowing (I.e. Morrisons PE buyout)?

KR: The Interest rates not reducing is concerning, this is making less money available for Businesses/Customers to spend along with increased cost of living, high energy costs, so customers hold on to money longer instead of paying.

• What’s your outlook on construction?

BL: The Outlook is one of slow growth determined by the willingness of developers of all levels accepting the increased cost of construction. Fair treatment of sub-contractors and suppliers is some way away. One other aspect is the question of prompt payment and certainly, main contractors need to sign up and adhere to the prompt payment code rather than seeking ways around it or worse still ignoring it.

• If convictions are so low, what’s the success rate in recovering the proceeds from scams and fraud? 

Mark Halstead Co-founder at Red Flag Alert (MH): Very few people recognise straightaway they have been conned, therefore the monies are often moved in the first hour or two and never seen again, so recoveries are low.

Martin Kirby, Head of Credit Risk & Collections, Calor Gas (MK): The success rate in recovering the proceeds from scams and fraud can vary significantly, largely depending on the type of fraud, the speed of detection, and the effectiveness of the recovery strategies employed. While exact statistics can be hard to pin down, several factors influence recovery success:

1. Early Detection: Rapid identification of fraudulent activities increases the likelihood of freezing assets and initiating recovery processes before the fraudster dissipates funds.
2. Collaboration with Law Enforcement: Close cooperation with law enforcement and regulatory bodies enhances the chances of successful recovery. Specialised units within police forces, such as the UK’s National Crime Agency, often play a crucial role in tracing and recovering assets.
3. Use of Civil Recovery: Civil legal remedies, such as obtaining freezing injunctions or pursuing civil lawsuits, can be practical tools for asset recovery. These processes can sometimes be faster and more flexible than criminal proceedings.
4. Forensic Accounting: It is crucial to employ forensic accountants to trace funds and uncover hidden assets. These professionals can follow the money trail through complex networks of transactions.

Despite these efforts, recovery rates can still be low due to various challenges, including the complexity of international fraud schemes, legal hurdles, and fraudsters’ sophistication. Industry estimates suggest that recovery rates can be as low as 10-20% of the total fraud losses, but proactive measures and robust fraud response strategies can improve these odds.

• There is a reluctance for companies to admit they are a victim of fraud. How can we encourage more openness around the subject?

MH: The only way is to be open, discuss it internally, understand how it happened, put remedies in place, only then can you confidently speak publicly about it, but in doing so know you help others.

MK: Encouraging openness about being a victim of fraud is essential for fostering a culture of transparency and continuous improvement. Here are several strategies to promote openness:

1. Creating a Safe Reporting Environment: Establish clear, confidential reporting channels for employees and stakeholders to report suspected fraud without fear of retaliation. This could include anonymous hotlines or digital reporting tools.
2. Leadership Commitment: Senior management should lead by example, openly discussing fraud incidents and the measures taken to address them. This sets a tone of accountability and transparency.
3. Training and Awareness: Regular fraud awareness and prevention training can help demystify the issue and empower employees to speak up. Highlighting real-world examples and case studies can make the risks and responses more tangible.
4. Non-Punitive Culture: The primary goal is to learn and improve rather than punish. They are encouraging a culture where mistakes are seen as learning opportunities that can reduce the fear and stigma associated with reporting fraud.
5. Collaborative Industry Efforts: Participate in industry forums and working groups dedicated to fraud prevention and response. Sharing experiences and best practices within the industry can help normalise the conversation around fraud.
6. Regulatory Encouragement: Advocate for regulatory frameworks that support and protect whistleblowers and encourage companies to disclose fraud incidents. Government incentives or recognition for transparency can also be motivating factors.

• What sectors are the most impacted by business fraud?

MH: Absolutely any and all businesses, but for sure where high volume transactions take place, where you have High Value Goods and very mobile goods. The number one thing is Money, so any requests to change bank details should be treated with suspicion, very few companies change bank accounts.

MK: Business fraud can affect any sector, but specific industries tend to be more vulnerable due to their structure, the nature of their transactions, or the value of their assets. The sectors most impacted by business fraud include:

1. Financial Services: Due to the large volume of transactions and the high value of assets, banks, insurance companies, and investment firms are prime targets for various types of fraud, including insider trading, embezzlement, and cyber fraud.
2. Retail and E-commerce: The rise of online shopping has made the retail sector susceptible to payment fraud, identity theft, and return fraud. The sheer volume of transactions makes it difficult to detect fraudulent activities promptly.
3. Healthcare: Due to the complexity of billing systems and the high value of medical services, this sector is often targeted for fraudulent billing schemes, insurance fraud, and identity theft.
4. Manufacturing and Construction: These industries face risks from procurement fraud, theft of materials, and falsified expense claims. The long supply chains and numerous subcontractors involved increase vulnerability.
5. Public Sector: Government agencies and public institutions often deal with procurement, grant, and benefits fraud. The large budgets and complex bureaucratic processes can make oversight challenging.
6. Telecommunications: This sector faces subscription, premium rate service, and international revenue share fraud. Rapid technological changes and a large customer base create numerous opportunities for fraudulent activities.

By understanding which sectors are most impacted, companies can tailor their fraud prevention and detection strategies to address the specific risks they face. This is how I see being proactive: Stop reacting to fraud and get on the front preventative foot. It is in everyone’s gift and an easy business case.