Since 2003, BDO has been tracking reported fraud cases valued at over £50,000 in the UK. Our FraudTrack report is in its 14th year and reveals that the total value of reported fraud in 2016 was £2bn, a five-year high and an increase of 32% from last year’s research.
Our headline findings are:
- The average value of reported fraud increased by 35% from £2.9m in 2015 to £3.9m in 2016
- The value of reported Finance & Insurance fraud fell by 62%, from £567m in 2015 to £215m in 2016
- The total value of reported Tax fraud increased by 220% and made up 69% of all reported fraud by value in 2016
- London & South East, North West and West Midlands again suffered the highest number of reported fraud cases, accounting for 32%, 15% and 11% of cases, respectively.
Our interpretation of the statistics
As technology becomes more sophisticated and increasing amounts of our professional and personal information are more accessible online, businesses and individuals now face an unprecedented risk of fraud through cybercrime and social engineering. It is therefore vital that we all stay one step ahead in order to stop fraudsters in their tracks.
Public administration was the industry sector with the highest level of reported fraud in 2016, accounting for £1.4bn of the UK total. This was due in large part to a single £1bn VAT case involving a woman from York.
Looking beyond the anomaly of the £1bn VAT fraud, the good news is that the value of reported fraud has fallen in many key areas and sectors. Unfortunately, volumes continue to remain high at over 500 cases a year suggesting that, while people are picking up on frauds before they spiral too far out of control, there is still plenty of fraud out there.
Remember that reported fraud is only the tip of the iceberg. Many frauds continue to go on undetected by businesses whose systems and controls are not effective in identifying and preventing fraud. Many companies also choose to investigate cases of fraud behind closed doors to avoid inevitable damage to their reputation.
This year’s results show a 62% decrease in the value of reported fraud in the finance & insurance sector. This may be partly as a result of the increased regulation and public scrutiny on the sector.
Reported fraud against individuals saw a 38% decline in value in 2016, compared to the previous year – the first decline since 2012. This may be in part due to an increased awareness of fraud, with people becoming more alive to the possibility of fraud and therefore being defrauded out of lower sums.
In order to stop frauds from escalating, it is now even more important for all organisations to put in place strong systems and controls to identify fraud at the earliest opportunity. If you want to discuss how BDO can advise you on detection and prevention of fraud and financial crime, please don't hesitate to contact Kaley Crossthwaite or Gavin Williamson.