Last year’s BDO FraudTrack report shows that the total value of reported fraud in 2015 was £1.5 billion (~$1.9 billion), representing an increase of 110 percent from the previous year and the highest fraud statistics value recorded since 2011.
The report, which examines reported fraud cases over £50,000 (~$65,000) in the UK, finds the average value of fraud has risen by 121 percent to £2.9 million (~$3.8 million), with some of the largest cases brought to court reaching over £250 million (~$328 million) in value.
The value of reported fraud in the financial sector more than doubled, from £238 million (~$312 million) in 2014 to £567 million (~$744 million) in 2015.
Third-party fraud within financial services showed the largest increase in value year on year, with a £197 million (~$258 million) hike in reported fraud during 2015. £210 million ( ~$275 million) of third party fraud reported within the sector included a fake invoices case, an investor con and a £142 million (~$186 million) case where six businessmen were charged with conspiracy to commit fraud on broadband installation contracts against financial institutions.
On a more positive note, the financial services sector witnessed a decline in employee fraud cases compared with 2014. The number of cases fell from 31 to 15, with the value also falling from £9 million (~$12 million) to £4.5 million (~$5.9 million).
Kaley Crossthwaite, partner and head of fraud at BDO LLP and author of the latest FraudTrack report, commented: “While the value of financial services fraud would appear to have jumped sharply, the numbers have been skewed slightly due to a small number of very large cases. Stripping these ‘exceptional’ items out would show an apparent fall in volume and value year on year.
“Sadly, though, this isn’t the full picture. Increasingly, we’re seeing high-value complex fraud being dealt with outside of the judicial system as companies prefer to confront these situations behind closed doors to avoid reputational damage. Our experience would suggest that, in real terms, both volume and value continue to rise despite efforts by companies in the sector to strengthen their processes.”
In terms of fraud statistics by location, London and the South East continues to grow as the ‘hotspot’ for reported fraud in the UK, with the value of fraud in this location increasing to £600 million (~$787 million) in 2015 from £483 million (~$633 million) in 2014 (and accounting for 40 percent of all fraud overall). However, while London and the South East remain at the top of the table, the most substantial increases on a regional footing are seen in the Midlands, Yorkshire and North East England.
Crossthwaite added: “As the financial capital of the UK, London has long been a hotbed for fraud and the 2015 data shows no sign of this trend abating. The most alarming findings are the very sharp increases in the level of fraud in both the Midlands and the North East. Tax fraud and money laundering in these regions have been the key drivers for this rise, led by a £262 million (~$344 million) reported tax avoidance scheme in Birmingham designed to take advantage of government breaks for the film industry.”
This article was originally published in LP Magazine EU in 2015.