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While the law-abiding tighten their belts as a result of the credit crunch, Britain’s fraudsters are getting fat, claim business advisers BDO Stoy Hayward.
The firms' latest FraudTrack analysis makes for grim reading as fraud figures
have increased at an alarming rate to reach new heights.
The research shows that reported fraud cost businesses over £705 million in the
last six months alone, a 74% increase on the same period last year.
The value of reported fraud in April 2008 alone was £317 million and there is no
sign that there is going to be any let up in the future.
The picture is worst in the finance and insurance sectors.
In those same six months, reported fraud cost bankers and insurers more than
£636 million , 90% of the total cost of fraud in the first 6 months of 2008, and
a 15 fold increase from fraud levels last year.
Businesses need to be aware that their biggest threat is not organised criminal
gangs, but their own “trusted” internal management and people they do business
with everyday.
Management fraud accounts for 46% of fraud cases and third party fraud accounts
for 32%, costing businesses a total of £541 million, 77% of all reported fraud
in the first half of 2008.
Simon P. Bevan, head of BDO Stoy Hayward’s Fraud Services Team explained: “What
we are essentially saying is that management are robbing you blind, suppliers
are ripping you off left right and centre and regulators are breathing down your
neck.
"As the recession deepens, regulatory pressures will increase and regulators
will become more intrusive, so be prepared.
"That’s a triple whammy for businesses in the UK.
“The fraud problem facing all UK business could be bigger still.
"Our latest figures, while grave enough, show only the value of reported fraud.
"What is really scary is that these figures don’t even include losses that may
have been incurred by rogue traders.
"When you add in the fraud that’s not yet been uncovered, or which businesses
have discovered but don’t wish to expose, the real cost to UK industry could be
much, much higher.”
As economic conditions worsen, the experts at BDO Stoy Hayward believe the
problem of UK business fraud is certain to grow.
Bevan added: “The combination of spiralling personal debt and desperate
employees spells real danger for business.
"Especially when, sadly, our figures provide clear evidence that commercial
organisations of all types and size throughout the UK are currently failing, in
some cases quite spectacularly, to get to grips with the fraudulent activity of
their staff.”
“We are seeing a dramatic increase in banks, corporates and public sector
organisations contacting us directly about our fraud investigation and
prevention services and we expect this to rocket further still.
"Interest is
coming from Board level as senior executives at British businesses are becoming
increasingly concerned about fraud risk as the credit crunch bites.”
As well as urging businesses to tighten their anti-fraud procedures, Bevan and
his colleagues at BDO Stoy Hayward are keen to see a tougher line on custodial
sentencing.
“While we know from our own research that UK custodial sentences for fraud have
increased, from 2.88 years in 2005 to 3.14 years in 2008, these are still low
when compared with those of other countries such as the US, where large frauds
can result in prison sentences of up to 20 years.
"Given the sheer value of reported fraud in this country, our sentences are
simply failing to reflect the severity of the crime and its impact on both
businesses and individuals.”
Source: Credit
Control Journal
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