The half-yearly analysis shows that:
• The finance and insurance sector remains a dominant fraud risk with 49% of all fraud in this sector
• Mortgage fraud accounts for a fifth of all reported fraud and 36% of fraud in the finance sector
The growth of fraud in the UK continues unabated according to BDO LLP’s six monthly update on reported fraud. For the first six months of this year fraud losses rocketed to £1.06bn and eclipsed previous half year figures and were almost the same as for the whole of 2008.
This is the first time fraud levels have soared above the £billion barrier during the interim period in the seven years BDO has been conducting its market leading survey. The average value of a single fraud has also increased to almost £6m, an increase from £5m last year, and shows that fraud in the UK is still big business.
This half-yearly Fraudtrack analysis shows that fraud is undoubtedly on the increase and BDO fully expects this to be another bumper year. In particular, BDO expects more enforcement action by regulators in the financial services arena with enforcement action for insider dealing also becoming more prevalent.
Simon Bevan, head of the fraud services unit at BDO LLP, predicts that competition between regulators to ‘act tough’ will lead to regulators following an American model of intrusive regulation. “We have a combination of political pressure and the understandable desire, in a downturn, for the public sector and corporates to be seen to have a zero tolerance policy,” he said. “We are therefore likely to see increasing regulatory action.”
From these interim results, BDO predicts that the average fraud will top £7m by the end of 2010. As the average value of each fraud rises inexorably over the years, companies need to continually assess the level of fraud and fidelity cover they need to combat the rising fraud threat.
London and the South East continue to be the hotbed of fraud activity with 71% of fraud but Wales has also experienced 15% of fraud in this interim period compared to only 2% last year.
Bevan concluded: “Fraud is as prevalent now as it has ever been and companies need to turn the vigilance screw up a couple more notches in recessionary times. The key message is to think the unthinkable, question the good, the bad and the inconvenient news, look for any anomalies in the financial statements and any significant lifestyle changes of the people around you. The regulators will impose heavy penalties so make sure you’re confident in the health of your business.”
