Welcome to BDO’s 16th FraudTrack report. This year’s report has found that the total value of fraud more than halved in 2018, falling to £746.3m.
Fraudulent activity cost the UK almost £750m last year. Although significantly less than the record-high levels of 2017, individuals and businesses are still paying a high price for criminal activity that can often be avoided with better controls and governance procedures in place.
While the fight against fraud appears to have strengthened, our experience suggests that as few as 1 in 50 cases of fraud in the UK is likely to be reported. It is difficult to get an accurate picture of fraud as the reported figures only shine a spotlight on the visible part of a much wider problem. Increasingly we are seeing high value complex fraud being dealt with outside of the judicial system as companies prefer to deal with these situations behind closed doors to avoid the reputational damage to their businesses. Our figures provide a conservative estimate of the scale of financial loss.
LONDON AND SOUTH EAST LEAD REGIONAL HOTSPOTS
London and the South East remains the biggest hotspot for fraud in 2018, accounting for over 60% of all recorded fraud in the UK, with the number of cases remaining the same, while the total value decreased by 70.7% to £476m.
Yorkshire took over from the West Midlands in 2018 as the largest hotspot for fraudsters outside London, with a 51.2% increase in the value of fraud to £52m. This large increase is due in part to a significant jump in the value of third-party fraud (315.6%) in Yorkshire with the average value of fraud increasing by 51.2% to £1.3m up from £860k.
MANUFACTURING WORST HIT SECTOR
In the last year, the manufacturing sector has witnessed the largest increase in the value of fraud as the total rocketed by 1014.3% to £22.8m and the total number of recorded cases rose by 37.5%.
The value of fraud in the real estate, rental and leasing sector dropped by 94% to £16.7m from £276.5m in 2017, while the number of cases reported remained the same.
Some of the other most notable changes over the last year included a dramatic increase in the value of fraud across the charity and construction sectors, which grew by 135% and 223.1% respectively to £20m and £8.3m.
Since 2003, we have been tracking fraud cases reported within publicly available sources, valued at over £50,000 in the UK. Our findings have taken us from a low value of fraud at £1.5m in 2003, to a high of £2.11bn in 2017.