UK fraud reaches new peak - are you prepared?

Fraud flourishes as the COVID-19 pandemic continues

The BDO Fraud Survey, which monitored fraud trends at 500 mid-sized UK firms throughout 2021 found that approximately eight in ten (84%) experienced fraud in 2021, with more than a third (37%) of businesses reporting an increase on the previous year. While one third (33%) of these frauds were externally generated, the majority (38%) involved collusion between internal and external individuals, while more than a quarter (29%) were committed against companies by their own employees.

The average fraud loss reported in 2021 totalled £223,000 with the professional services, leisure and finance sectors the hardest hit. Almost a third (30%) of firms reported suffering security breaches through cyber-attacks over the last 12 months. 

Have you assessed the fraud risk of your business's current working model?

For many businesses the ongoing impacts of the COVID-19 pandemic and associated lockdowns have exacerbated the risk of being targeted by fraudsters, with many citing the shift to remote working as a driving factor. Of those surveyed, approximately nine in ten (89%) think their company is more exposed to fraud compared to 2020, while almost a quarter (23%) believe their exposure has “significantly” increased. The overwhelming majority (89%) said fraud risks at their business have increased as a direct result of home working. 

With millions of employees continuing to work from home during 2021 - often without access to workplace IT support - the threat posed by scammers remained heightened. However, businesses with employees working on-site also remained vulnerable, with considerably more than half (67%) of the firms impacted by fraud reporting that their employees had predominantly operated from the office or work premises over the last 12 months.

As COVID-19 pandemic restrictions are eased further and office or hybrid working models become the norm for the year ahead, businesses are encouraged to pay particular attention to their internal controls, including strengthening their fraud risk management program to lessen their exposure to financial crime.

Fraud awareness and your business

Despite the rising number of frauds committed against mid-sized firms, a quarter (26%) of surveyed business leaders think the level of fraud awareness among their employees has declined since the onset of the pandemic as fraudsters deploy increasingly sophisticated tactics. Nevertheless, six in ten (63%) of the businesses surveyed have not implemented fraud awareness training programmes for their employees over the last year, while one in five (21%) don’t have a fraud response plan in place.

The ongoing disruption wrought by the pandemic during 2021, leading among other things to high levels of home working and strains on businesses’ IT systems and controls, added complexity to the process of identifying and defending against cyber-attacks and significantly magnified the associated fraud risk for businesses. The increasingly sophisticated and opportunistic tactics being developed by fraudsters have often outpaced the protections being implemented by many firms.

Creating fraud awareness among staff and others in the working and operational environment is an important aspect of any anti-fraud strategy. Heightened fraud awareness will proactively identify and mitigate fraud risks or fraud indicators that may be pervasive in business environments. Staff educational programs and frequent exposure to anti-fraud strategies and controls is critical in creating fraud awareness within the business and ensuring staff are not only fully aware of the impact of fraud but also actively engaged in detecting and reacting to red flags.

Is your business a target?

Looking forward, almost three quarters (69%) of business leaders are concerned about their business being targeted by fraudsters over the next 12 months – with 15% stating they are “very concerned”. However, 85% said resource constraints as a result of COVID-19 disruption will limit their investment in fraud detection and prevention tools over the coming year.

One of the key susceptibilities for all businesses is cybercrime. Cryptocurrency was once vilified as a payment model for criminal activity but in recent years has crossed over into mainstream business and appears to be here to stay. With more and more businesses opting to use cryptocurrency for their commercial transactions it is vital that they are fully aware of the associated fraud risks and that sufficient anti-fraud resources have been committed to implement fraud related-control activities.

Fraud risk management – a high priority going forward

Our survey findings highlight the importance of organisations proactively strengthening their fraud risk management program to help minimise threats from opportunist fraudsters. In an increasingly technology-led business environment it is vital that adequate resources are invested in this area to prevent and detect criminal activity and protect organisations from what could be a catastrophic outcome.

A well-managed fraud risk evaluation process will allow organisations to identify potential weaknesses and focus improvements in areas that are most critical to achieve organisational goals aligning with anti-fraud strategies. We anticipate that the ‘soft-target-approach’ of fraudsters identifying organisations most vulnerable to attack will continue well into 2022 and if you have not yet adequately prepared your organisation, now is the time to do so.

We are here to help you navigate and minimise the impact of fraud issues

At BDO we advise businesses on detection and prevention of fraud and financial crime. We help organisations understand the specific risks relevant to their business and develop best practice procedures and solutions to protect them against the threat of economic crime. Where businesses suspect they have been a victim of fraud we conduct rapid response forensic investigations and advice on crisis management. 

 

 

To implement proactive fraud prevention for your business, contact a member of our Forensic team.

Key contacts

Kaley Crossthwaite, ACA, Partner
Kaley Crossthwaite
Partner - Head of Forensic Accounting and Valuation Services
[email protected]
BDO London - Baker Street

Richard Shave
Director – Forensic and Valuation Services
+44 (0)20 7893 3546 (Direct line)
[email protected]
BDO London - Baker Street

Karen Edwards
Senior Manager - Forensic and Valuation Services
+ 44 (0)20 3219 4871 (Direct Line)
[email protected]
BDO London - Baker Street

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