Charity fraud: do you have the basics covered?

Businesses have faced many challenges because of the COVID-19 pandemic, but one which has especially impacted charitable organisations is the increasing risk of fraud, in particular cybercrime. Within the last year, charities in the UK have reported almost £8.6 million in lost funds due to fraud.

How are charities being targeted?

It appears that many attackers are using HMRC’s name when approaching victims. In a recent letter to the Charity Tax Group, HMRC revealed that they are aware of increasingly high numbers of criminals who e-mail, phone or text organisations and claim to be representing HMRC. Fraudsters then take advantage of the operational and financial challenges that charities have faced during COVID-19, by offering bogus tax rebates or refunds.

There has also been an increase in payment diversion fraud due to the complexities and process weaknesses, particularly in financial or IT systems, created by remote working.

Why are charities the primary target?

Charities are particularly at risk because more and more are becoming reliant on online donations and other online-based services. To save on scarce operational funds, charitable organisations tend to have fewer online security measures and fraud prevention procedures in place.

Remote working has also impacted financial sign-off methods, with many charities not having a specific staff member or trustee who is responsible for fraud prevention.

What actions should charities take to prevent fraud?

Charities should consider the following:

• Fraud prevention strategy – does the charity have appropriate fraud prevention policies in place and are these up to date?
• Awareness and training – do staff have awareness of policies and has adequate and regular training been provided?
• Internal controls – are there financial, and other, controls in place and are these fit for purpose? Is the operation and effectiveness of controls reviewed on a regular basis?
• Fraud response plan – is there a formal plan in place which details what to do when a fraud has been uncovered? Does this include policies on reporting to regulators, recovering funds etc?

How can we help?

At Lubbock Fine, our specialist charity team works together with charity trustees and finance teams of all shapes and sizes, taking on the challenge of finding practical solutions that work for our charity clients.

If you’re concerned or wish to discuss any of the matters raised above further, please get in touch with our Associate Director, Hazra Patel (hazrapatel@lubbockfine.co.uk) or our joint Head of the Charity and Not For Profit team, Lee Facey (leefacey@lubbockfine.co.uk).