More than £2 billion of fraud was reported last year, the largest amount ever according to the BDO’s 2011 FraudTrack report.
This is a 50% increase on last years figure of £1.4 billion. When the survey was launched in 2003 it recorded £331 million, showing a seven fold increase in eight years.
The 2011 FraudTrack report, which took into account all reported cases of fraud over £50,000, shows dramatic rises in both the volume and the average value of reported cases. In 2011 there were 413 reported cases worth an average £5 million each, compared with an average of 372 cases worth an average £3.7 million.
Despite the worrying increase of fraud, the insurance sector remained relatively out of harms way last year. The insurance and finance sector accounted for 27% of all reported cases last year, compared to 56% the year before. This is due to increased measures from the sector in protecting themselves, including funding the new Insurance Fraud Enforcement Department of the London Police which opened last week.
“Financial services institutions have invested heavily in systems and technologies to prevent and track fraud, so the fact that reported fraud in this sector has decreased as a percentage of overall fraud suggests this approach is working,” said Simon Bevan, Head of Fraud at BDO LLP.
“But there is still a long way to go. The most serious frauds, in terms of financial loss, in financial services are often committed by employees and management. Yet most of the inhouse fraud teams within banks etc tend to be made up of ex-policemen. They are often too focused on external ’Criminals’ dealing with credit card fraud, phishing etc., when the greatest risk is internal with banks employees committing commercial lending, mortgage or rogue trading fraud.
“It is this failure to take a holistic approach to tackling fraud that can lead to those high profile, costly incidents that we have seen in recent years.”
The most common type of fraud last year was tax fraud, making up just over 36% of reported cases and costing an average £13 million each.
