The Fraudtrack report by BDO revealed that the average cost per fraud was £3.27m, a 79% increase on the same period a year ago.
Fraud is still big business in the UK, with many companies and individuals still not doing enough to protect themselves from fraudsters.
Individuals remain the main target for fraudsters and scams continue to con the general public, accounting for more than 25% of all reported fraud and totaling £188m of losses.
London is the UK’s fraud hotspot with the value of reported cases at £460m.
Employee fraud accounts for 32% of all reported cases, costing UK organisations more than £46m.
The most common types of fraud include the straight diversion of cash into bank accounts, changing supplier details to friends or family member’s bank details and direct payments to self/other bank accounts via cheques or online payment systems.
Kaley Crossthwaite, partner and head of fraud at BDO, has called for businesses to be more vigilant and to think about how their business is susceptible to fraud.
She said, “When it comes to fraud committed by employees, our experience tells us that the culture in a business can have a significant effect on whether fraud is detected or the length of time it takes to detect; in some cases it can be as long as seven years. Detection can often take longer where there is more than one employee engaging in fraudulent activities at the same time and they are all utilizing the light-touch culture of a business to conceal these activities.
“Preventing this can be as simple as putting training in place, regularly checking fraud controls as well as setting the tone at the top and ensuring it filters down into the organization, creating a culture of healthy skepticism.”
Investment fraud such as Ponzi schemes and boiler room scams accounts for 23% of reported cases. Third party fraud – fraud committed by suppliers and customers – accounts for 20% and non-coporate fraud accounts for 16%.
Crossthwaite said, “The level of investment fraud is the stand-out category. This may be the result of ‘too-good-to-be-true’ investment opportunities, such as those which offer investment in precious metals, gems and other esoteric products, turning out to be just that. There is a risk that with the recent pension freedoms, these illegitimate investment offers will continue and perhaps even increase, luring a new generation of investors with market leading returns.
“With third party fraud, the majority we see is along well established lines such as phishing and changing of supplier details. However, there are also worrying new trends that are emerging that organisations need to be on the lookout for. These include false employees and contractor creation, generating an artificial inflation of costs and customers purchasing non-existent products such as flights, magazines and car insurance. “
Crossthwaite urged businesses to be more thorough in all due diligence carried out.
“This is not only about preventing future losses but also thinking about the long-term damage that can be done to a business in terms of its ability to get new suppliers and customers as well as their reputation in the market.”
Levels of fraud differ across sectors, with the public sector falling foul to fraud most often. One in five cases of reported fraudulent activity occurred within public administration, accumulating a total value of more than £257m. Fraud in financial services was also relatively high with around one in seven cases being committed in the sector; equating to a value of £210m.
Crossthwaite concluded, “The increased level of reported fraud could be down to firms having less time or inclination to deal with claims internally and individuals also being too laid-back in protecting themselves.”