Nearly 18 months after its
inception, a new information service aimed at helping asset finance
providers avoid fraudulent transactions has provided millions of
pounds worth of potential savings to its participants.
The Finance & Leasing
Association (FLA) Credit Communities Service was launched by
the FLA in conjunction with operator Dun & Bradstreet (D&B)
in April 2009, with the aim of giving FLA members a secure and
discreet way of alerting each other to suspicious potential
customers.
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This year the service expanded to
include members of the Asset Based Finance Association, on the
basis that a potential fraudster approaching an asset finance
company might well go on to approach an ID or factoring provider,
or vice versa.
The system works by taking
anonymous online tip-offs from lenders who suspect something to be
amiss with a business applying for finance. These tip-offs are then
investigated by D&B. Once investigations are complete, the
results are posted online.
As well as going into a searchable
online database for other members of the scheme to see, potential
fraud alerts are passed on to relevant police and government bodies
in order to protect the public interest.
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By GlobalDataLosses avoided
The idea is not a new one. D&B
has offered information sharing services for more than 10 years,
and pioneered its first fraud alert system in 2003. Since then, it
has set up information sharing communities for the IT and telecoms
industries, among others.
The FLA, meanwhile, had been trying
for some time to find a service to replace its previous
information-sharing system. Grey Squirrel was an email-based system
which, while widely used, provided only a one-off alert message to
members and did not include a database function.
While all FLA members are not yet
signed up to the new service, it has been picking up new
participants at an increasing rate, and has generated some
encouraging statistics already.
More than 200 tip-offs have been
received from members so far, of which nearly 80 have been
processed into alerts after investigation by D&B, giving a
conversion rate of around 40%.
Adding together all reports from
members about business refused as a result of receiving alerts,
D&B estimates that at least £7m (€8.2m) of potentially
fraudulent business has already been avoided by members. This
figure, however, only represents refused applications reported back
to the service.
Julian Rose, head of asset finance
and data policy at the FLA, said that members were “very happy”
with potential savings received so far, and were particularly
attracted by the investigation service offered by D&B.
In communities that have been
established longer than the FLA scheme, such as telecoms, results
have been striking. Donna McClarence, credit supervisor at BT
Business Direct, said that involvement had reduced fraud in the
business by as much as 80%.
Each FLA member that joins the
scheme pays a fee in proportion to the size of their asset finance
book. For example, a business with lines of business in both
invoice discounting and asset finance would pay only based on the
size of their lease book.
In addition to suspicious activity
alerts, participants in D&B’s FLA community gain access to an
asset register, aimed at avoiding scams such as multiple financing
schemes. The register allows users to register an interest in
assets with particular customers, after which they can check to see
whether other users have already registered a potential or actual
interest in the assets.
For example: an FLA member buys a
printing press from a publisher and then leases it back to them.
They then make an entry in the register against this company’s
name, providing a set of information about their interest in an
asset.
This information is then available
to other users, potentially preventing the sort of difficulty
arising from scenarios like the alleged multiple financing at
defunct plastics manufacturer Global EPP.
Rose said that the asset register
system is still in its early days, and that more work is to be done
on its functionality, but that it was “a really important facility
for the industry to have access to”.
In terms of the wider offering,
Rose reported that discussions are underway with the National
Association of Commercial Finance Brokers, aimed at allowing its
members to feed tip-offs into the system without having to acquire
full membership.
The level of co-operation between companies and associations
involved in the credit community has improved the industry’s
ability to avoid fraud; this could grow stronger if more FLA
members join the programme.
