Businesses report £262m in annual fraud losses

Businesses reported £262m in fraud losses last year according to data from ActionFraud, the UK’s national fraud and cyber-crime reporting centre, obtained under the freedom of information act by RSM, which is warning companies need to do more to protect themselves

The statistics show businesses submitted almost 40,000 reports to the police about fraud in 2016-17. The highest losses resulted from incidents of cheque, plastic card and online bank fraud (£46.7m).

This was followed by corporate employee fraud at £40.4m and mandate fraud at £32.2m. Mandate fraud is where fraudsters obtain details of direct debits, standing orders or account transfer details and amend them to transfer monies to other accounts.

The highest levels of fraud losses reported by businesses were in the Met Police Force area (£32.2m), followed by Essex (£29.2m) and Sussex (£23.9m).

The highest number of reports (14,697) concerned ‘retail fraud’ committed against shops and restaurants. Such crimes would include attempting to obtain a refund for stolen goods, switching labels on clothes to obtain a cheaper price or ordering food in a restaurant and leaving without paying. This accounted for £7.7m in losses.

Akhlaq Ahmed, forensic partner at RSM said: ‘Businesses are losing hundreds of millions of pounds through fraud every year, much of which can be prevented by simple controls.

‘Companies should be much more proactive in ensuring their defences, both online and offline, are fit for purpose. Those that don’t take action could find themselves very exposed.’

Separately, research from CIPFA and Moore Stephens has identified misspending government funding as the top risk area for fraud, with individuals, business and charities either applying for and receiving money for which they are not eligible, or spending funds on activities that were not included in the conditions of the grant.

The research included a survey of over 150 partners across 37 countries to gauge the most serious at-risk areas across the globe. Respondents considered 18 different types of fraud, scoring them from 1 (lowest risk) to 5 (highest risk).

Almost half (48%) of accountants surveyed said that grant fraud poses a high or very high risk, putting it at number one. Money laundering is seen as the second highest risk, with 42% of respondents rating it as a high or very high risk, followed by payroll fraud, cited by 41%. 

In developed countries, grant fraud comes top of the list of concerns with 53% of respondents rating it as high or very high risk, followed by bribery (47% of respondents) and payroll fraud (46%).

For the UK specifically, grant fraud and payroll fraud are the top two risks, with 44% and 41% of respondents rating it as high or very high risk respectively.

John Baker, director at Moore Stephens, said: ‘It may seem surprising to find Government grants eclipsing more “fashionable” areas like cyber-crime when it comes to fraud risk. That said, it may be the case that areas such as cyber and bribery have been addressed more recently due to the high profiles, leaving more traditional areas unattended.

‘Respondents in both developed and emerging economies seem to agree that funding bodies and donors should be focusing on doing more to tighten up their scrutiny of grant applications.

‘If it wasn’t for whistle-blowers and financial auditors, many of these fraudulent schemes would go unnoticed and millions would be lost to fraud.’

This week, November 12 – 18 marks International Fraud Awareness Week, promoting anti-fraud awareness and education. Details are here.

Report by Pat Sweet

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