The Federation of Small Businesses (FSB) is the UK's leading non-party political lobbying group for UK small businesses existing to promote and protect the interests of all who own and/or manage their own businesses. With over 200,000 members, the FSB is also the largest organisation representing small and medium sized businesses in the UK.

  The FSB noted from the House of Lords Science and Technology Committee's press release of 22 March 2007 that the DTI and Home Office Ministers Mrs Hodge and Mr Coaker are giving evidence to the Committee and will be questioned on the costs of cyber-crime to the UK economy and whether the police are adequately funded and have the right skills to deal effectively with cyber-crime. The FSB would like to make its own response to these issues particularly on the point about the costs of cyber-crime to the UK economy.

COSTS OF CYBERCRIME TO THE UK ECONOMY

  The FSB "Lifting the Barriers to Growth in UK small businesses report 2006" is based on the survey results of 19,000 businesses in the UK.[12] In the section of the report regarding e-commerce, members were asked about the perceived barriers to e-commerce. The third highest answer, which elicited a response from 20 percent of members, cited the risk of online fraud as one of their biggest concerns. This figure clearly shows that businesses are deterred from making greater use of buying and selling online because of the fear and risk of online card fraud, which is dampening down enterprise.

IMPACT ON SMALL BUSINESSES

  The FSB has a particular interest in IT security because the majority of its membership is self employed or runs micro businesses; a third of which operate from home-based premises, without any back up from an IT security department. The FSB's experience is that small businesses are still vulnerable to and fall victim to spam and "phishing" emails from organisations purporting to be major banks or even HM Revenue and Customs, as was a case recently. These sorts of phishing emails are not a new phenomenon but are continually being reinvented and businesses that do not have IT experts or advisers to turn to for assistance are still falling victim. The Government and banks need to do more to educate both the public and businesses to not respond to these types of emails. We do however appreciate the important work and advice available on the "Get Safe Online" website at www.getsafeonline.org.

THE POLICE AND GOVERNMENT RESPONSE

  The FSB calls for better support from both the Government and the police on the issue of online fraud and increased resources put into the police response to tackle it. The FSB welcomes the Government commitment to taking forward the recommendations in the Fraud Review 2006 and hopes that the National Fraud Reporting Centre led by the City of London Police will provide a useful channel for businesses to report, and gain feedback on incidences of online fraud. Wales has recently launched an agency to tackle electronic crime specifically which brings together government, police, academics and business in the fight against online criminals. The agency will track e-crime and make firms better informed about the risks and be more alert to potential attacks. Such an agency does not exist in England and the FSB would support the establishment of a specific section in the Fraud Reporting Centre which is dedicated to working with business and responding to and giving feedback on instances of e-crime.

  Finally, a recent case study of an FSB member illustrates the huge costs that small businesses are forced to pay after falling victim to e-Crime and the lack of police response to follow up on these types of cases. Anecdotal evidence from members tells us that the police do not seem to have any where near the capability necessary to respond to these types of crime effectively. The police need to ensure that the criminals are caught and that the sentencing acts as a real deterrent to other potential offenders.

FSB CASE STUDY

  An FSB member runs a concert/night club venue and operates an online ticket office booking service. He was contacted by his service provider informing him that his system "may" have been compromised and was advised to have a forensic audit carried out. The service provider said that this work would cost £30,000 to the business. The member checked that this was not a scam and trusted the service provider as he had been dealing with them for some time.

  Following discussions with the service provider, the member had a forensic audit carried out at a cost of £9,000 to the business. Independent contacts from the Fraud Advisory Panel said that the business should really have paid around £3,000; however, the business was compelled to use a particular audit company because of requests made by the service provider.

  The member has now had to pay a huge amount of money because of the actions of criminals and through no fault of his own. His solicitors tell him that he is actually not covered by insurance in this instance. The member reported the issue to the police but has not as yet received a response.

2 April 2007