A York-based card and identity protection group has today disclosed serious loopholes in processing procedures which have contributed towards the corporate identity fraud of nearly 100,000 small and medium sized enterprises (SMEs).

The report, commissioned by CPP, one of York’s biggest private employers with more than 1,000 employees, details how the crime has cost the economy £1.3 billion – an average of £13,500 each – as fraudsters target Companies House loopholes as well as small firms’ lax approach to data protection.

One in five SMEs (22 per cent) admit they may be vulnerable to corporate identity theft due to lax procedures and protocol – but this figure could soar as criminals catch on to the data processing loophole, states the report.

Fraudsters typically change company directors’ details or the company’s registered office address, by submitting false documents to Companies House through amendments to the company records via a simple submission of a paper form.

Under existing systems, Companies House does not verify paper document validity. There are no checks if imposters try to register as new company directors or change a business address. SMEs are also exposed to risk through their own data handling. Nearly half (47 per cent) said their employees had access to sensitive company data, and almost two-thirds (61 per cent) admitted not encrypting company data.

The impact is severe – with victims reporting their company credit rating being affected, damage to their company reputation and losing customers.

Michael Lynch, fraud expert at CPP, said: “Our report demonstrates that corporate identity fraud is a real concern for businesses. It’s key that organisations ensure that they have secure methods of storing sensitive information to avoid falling victim to this growing problem.

“We urge SMEs to take advantage of the safe online systems in place, to protect their business and for many SMEs, their livelihood.”