After all the hard work and preparation, becoming a registered limited company and assuming the role of the company director is certainly an achievement to be proud of.
But as is the case with most big career changes, entering the small business world is not without its risks. Take precautions when setting up your company to stop criminals exploiting data and committing identity fraud. But don’t panic: there are plenty of ways you can learn to protect your company directors from identity fraud.
Fraud and identity theft: what’s all the fuss about?
Make no mistake: fraud affects 1 in 4 small businesses every year. In 2016, small businesses lost approximately £18.9 billion to fraud, with many reporting losses of around 5% of their annual revenue. That’s a huge setback for any small business just finding their feet. So it’s important you protect your company from the start.
A study conducted by Portsmouth University highlighted that the cost of fraud against individuals was thought to be £9.7 billion a year: of this, identity fraud is the largest contributor at £5.4 billion.
Identity fraud has risen 68% since 2010, and there were 173,000 individual cases last year. Another report by Cifas, the fraud prevention service, revealed that nearly 19% of identity fraud victims are company directors – despite the fact that this demographic amounts to less than 9% of the UK population.
Why are company directors at risk?
Behind most small businesses are passionate company directors who invest their money and time into ensuring their businesses survive. It is this commitment that makes them great businesspeople – but also natural targets of identity theft. Don’t forget to put enough resources into protecting against identity theft. Smart criminals know this and will target company directors deliberately.
Added to this, the fact it’s easy to access directors’ personal details (names, addresses and dates of birth are free to members of the public online) means company directors are at a high risk. Barbara Judge, chairman of Cifas and the Institute of Directors pointed out that fraudsters can use this public information combined with photos found on online profiles, and details logged with banks, insurance, utilities and services companies.
Another finding of the same Cifas report was that nearly a third (28%) of director-level fraud victims are in their 30s. This makes sense when you consider that fraudsters thrive on information from social media sites – younger people are typically more frequent users of online profiles and will often have more personal information about themselves online.
How to protect your identity and what to tell your company directors
Though company directors are at risk, there are plenty of things you can do to safeguard your identity. Protect your identity from being targeted in 3 steps:
1. Be careful about what you make public
Company directors who show off their assets and status online are likely to attract the attention of keen fraudsters. Ok, you may be feeling your success and want the world to know, but posting evidence of your wealth online to those you don’t know or trust will draw unwanted attention to you and your business. An example of this was a social media post from Alan Sugar including a photo of one of his personal cheques with his bank details blanked. However, his signature and the name of his bank were clear to see – valuable data which can used against him.
Fraudsters are experts in finding bits of data and piecing them together to create an overall picture of your identity. To prevent this, ensure you think hard about the information about you that is accessible to the public. Review your privacy settings and the personal information that already exists in the public domain, and perhaps switch your Instagram and Facebook accounts to “private” just in case.
2. Keep a close eye on your accounts
Start putting time and resources into checking your credit file and your accounts regularly. You’ll get a good idea of what to look out for just by learning about common fraud cases and seeing the patterns.
You’ll find, for instance, that one problem many companies experience is fraudsters who submit forms to Companies House which allow them to change the names of company directors and even the company’s registered office address. Once that’s done, the “new” directors can open their own new bank accounts, and have goods delivered to “new” addresses.
To avoid this kind of activity, you should keep a close eye on your credit file and look out for any suspicious activity. The quicker you become aware that your details have been used fraudulently, the easier it’ll be to minimise the damage, and the higher the chance of preventing heavy losses. To add a further layer of protection to your accounts, it’s also worth getting into the habit of shredding all your financial documents before you throw them away.
3. Employ an official Registered Agent Service
Responding to the report by Cifa, a Companies House spokesperson stated that they’re “aware of concerns about the risk of identity theft”, and added that they are “currently working with the Department for Business, Energy and Industrial Strategy to review the current provisions on the availability of personal information on the register.”
While it’s good news that Companies House is taking measures to address this, it would be unwise to rely on Companies House alone to protect your data. Their job is to maintain public records, and they are not a crime prevention agency.
Opt for a reliable and safe Registered Agent Service that ensures you fulfil the necessary legal registration requirements, whilst keeping company directors’ addresses off the company register and out of public hands. We created our Registered Agent Address Service especially for that purpose: to keep your details secure from identity theft, give you peace of mind and responsibly hold and forward government and HMRC mail to you, ensuring you don’t miss any important letters. Try our monthly or yearly plan, and you can even take advantage of our free month trial.
As a small business owner, the safety of your data and risk of identity fraud should be front of mind, not just for your own benefit, but for your company directors too. Don’t take any risks – start getting your company in shape now.
For more information and advice on starting a business, check out our handy company formation guides or browse the help centre.
Get your free month’s trial of Registered Agent Address Service when you form a company today.
Published Wednesday August 23, 2017