Fraud Losses Reach Record £1Billion in UK

Sector: Banking & Finance

19th July 2010

One of the world's largest accountancy firms says fraud has hit a record of £1bn in the first six months of the year. The findings come from accountancy firm BDO, which has been monitoring fraud levels for the past seven years. The main types of financial crimes, says BDO, include mortgage fraud, under-reporting of revenue and VAT avoidance. Mortgage fraud now accounts for 20% of all reported cases. The average amount of each type of fraud had increased to almost £6m, up from £5m last year.About 16% of all reported fraud came from management falsifying the accounts of their own companies.

Simon Bevan, Head of the Fraud Services Unit at BDO, said the increase could not be blamed on the economic downturn. He said fraud continued throughout good and bad times, but austerity brought greater scrutiny and a higher number of laid-off employees prepared to blow the whistle on illegal practices. Another growing trend identified by BDO is where managers of companies commit fraud by either setting up "companies within companies" or diverting lucrative contracts away to accomplices. "Linked to this unethical activity is an increase in insider dealing where management don't directly defraud their own employer but their actions leave them open to stringent, and often public, enforcement action by financial regulators," Mr Bevan said. About 49% of all fraud occurs in finance or insurance, according to the figures.

The BDO data, published every six months, may understate the scale of the problem, because only cases that have been publicly reported to authorities are included.

Source: BBC News - Read the full article >