UK fraud topped £2bn in 2011, equating to a whopping 50 per cent increase on the previous year, according to market watcher BDO LLP.

The firm’s FraudTrack report claimed the figure was the highest ever for its annual survey, with the 2010 amount hitting £1.4bn.

In 2003, when the report was launched, fraud totaled £331m, meaning levels have rocketed seven-fold since then.

FraudTrack collates data from all reported fraud cases (tax fraud, supplier and customer fraud, corruption, management fraud and employee fraud) over £50,000, and it also tracks the average value of cases. Unsurprisingly, values of fraud also increased in 2011 – an average of £5m, compared with £3.7m in 2010.

Retail represented the highest increase in fraud for the year – accounting for 12 per cent of all fraud in 2011 compared with two per cent in 2010. Finance and insurance accounted for 27 per cent of fraud, dropping dramatically from the 56 per cent in 2010. Construction-based fraud also dropped to one per cent, down from 34 per cent in 2010.

Simon Bevan, head of fraud at BDO LLP, said: “The fact that reported fraud is up is worrying, but not at all surprising. When the economic climate is difficult there is even more focus on the bottom line and driving out unnecessary costs, so fraud is more likely to be uncovered.

“But organisations need to much more proactive when it comes to preventing fraud. Too often risk teams are either too externally focused or fail to look at fraud from a financial point of view,” he added. “Organisations need to be taking a P&L approach to fraud risk. If companies continue to take a reactive approach to preventing fraud, I’m in no doubt that these figures will continue to rise year on year. You cannot design all fraud risk out of a business but you can put trip wires in place.”

DRILLING DOWN:

  • Tax fraud accounted for the highest percentage of fraud committed, at just over 36% and with an average cost of £13m - significantly higher than the average across all frauds (£5m). As a percentage of overall fraud, tax fraud has steadily increased in recent years, from 15% in 2009, to 20% in 2010, to 36% in 2011.
  • After tax fraud, most fraud is committed by suppliers and customers (30%) with the average cost per supplier/customer/fraud at £7.7m. As a percentage of overall fraud this has also increased steadily, from 12% in 2009 and 18% in 2010.
  • Employee fraud is down to 10% from 14% in 2010. The average per fraud is only £14.m which is substantially lower than the average across supplier/customer fraud and across all frauds.
  • Cases of corruption are steadily increasing from less than one per cent in 2009, to just under two per cent in 2010 to 4% in 2011.
  • Management fraud has been steadily decreasing and the 2011 figure is the lowest in four years (2011 - 5.5%, 2010 - 13%, 2009 - 24%, 2008 - 31%).

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