Value of fraud more than halves from 15-year high
26 Feb 2019
The total value of fraud in the UK more than halved in 2018, down 64.7% from a record 15-year high of £2.1bn in 2017 to hit £746.3m, but there are concerns that the true figure could be substantially bigger, according to research by BDO
26 Feb 2019
Despite the dramatic drop in value, the number of reported fraud cases has remained broadly in line with the previous year, decreasing 9% from 577 to 525 according to the firm’s annual FraudTrack report, which examines reported fraud cases over £50,000 in the UK.
The average value of fraud has fallen to £1.4m, down from £3.7m in 2018.
Kaley Crossthwaite, partner and head of fraud at BDO, said: ‘While the fight against fraud appears to have strengthened, our experience suggests that as few as 1 in 50 cases of fraud in the UK is likely to be reported. These figures therefore only shine a spotlight on the visible part of a much wider problem.
‘The true cost of fraud could be as high as £37.5bn per year, based on average fraud values found in our research. Increasingly we are seeing high-value complex fraud being dealt with outside the judicial system as companies prefer to deal with these situations behind closed doors to avoid reputational damage.’
In the last year, the manufacturing sector has witnessed the largest increase in the value of fraud, with the total up by 1014% to reach £22.8m and the total number of recorded cases increasing by 37.5%.
The utilities sector saw the value of fraud rising over 1400% to £9.3m, up from just below £618,000 in 2017, despite the number of reported cases dropping by a third. There were also substantial increases in fraud values across the charity and construction sectors, which grew by 135% and 223% respectively to £20m and £8.3m.
According to BDO, greed remains the greatest driver of fraud across the UK, where the motive is known, with 46% of cases stemming from human avarice and the total value accounting for 76.6% of recorded fraud with known motive. From a cost perspective, gambling and health/depression were the next greatest contributors, with a value of £24m and £16m.
The firm also highlights what it calls ‘an astronomical increase’ in unauthorised use/misuse of assets fraud, with the value up 57185% in 2018 to £115.1m, and the number of cases up 1750% from two to 37.
The top two most common types of fraud were third party fraud (£181.3m) and tax fraud (£133.7m).
London and the South East remains the biggest hotspot for fraud in 2018, accounting for over 60% of all recorded fraud in the UK, with the number of cases remaining the same, while the total value decreased by 70.7% to £476m.
Yorkshire took over from the West Midlands in 2018 as the largest hotspot for fraudsters outside London, with a 51.2% increase to £52m. This was due in part to a significant jump in the value of third-party fraud (315.6%) in Yorkshire with the average value increasing by 51.2% to £1.3m up from £860,000. One of the more notable cases of third party fraud was a £10m case involving money laundering through the resale of tickets for gigs and events.
The biggest increases were seen in East Anglia, the west country and Scotland, at 302.8%, 198% and 88% respectively.
Crossthwaite said: ‘The chink in the armour for most UK companies continues to be its people. With third-party and employee fraud making up two of the top five types of frauds by value, there needs to be greater controls and monitoring of who has access to critical information within a business. This, alongside improved education and retraining of workforces, is vital.’
Report by Pat Sweet