31/01/11

By Claire West

Jonathan Russell, partner, ReesRussell: says “Fraud is much wider than many people think and a lot of what is included in fraud many don’t even consider as such.  Some of this ‘not wrong’ behaviour can be considered theft or fraud and often is considered part of the normal employment methodology. This can be as simple as hourly paid employees logging hours that aren’t worked, taking sick days when not ill, using the businesses goods privately and many others.  This is the so called victimless crime, such as our MPs fiddling expenses, that is now starting to become unacceptable.”

The survey showed that the public sector has the highest proportion of the fraud loss at £21 billion – 55% of the total figure. This estimate, for the first time, includes new and more accurate figures for procurement (£2.4 billion) and grant fraud (£515 million).

The size of the public sector estimate is, in part, due to diligence in reporting fraud loss data, combined with more comprehensive measurement techniques than other sectors. It is also important to note that this figure represents a relatively small percentage when taken in context of the public sector’s overall spending and income.

Private sector fraud losses of £12 billion make up 31% of the total annual figure.

The financial services industry recorded the highest loss to fraudsters at £3.6 billion. This is a slight decrease on the 2010 AFI figure of £3.8 billion due to improved fraud prevention methods involving plastic card (£440 million) and cheque fraud (£30 million)

Online banking, however, has seen an increase of 14% (£60 million). The sector continues to invest heavily in counter fraud systems and solutions to help stay one step head of the criminals

Mortgage fraud (£1 billion) and insurance fraud (£2.1 billion) remain high.

A new inclusion in the AFI is fraud losses to SMEs at £780 million. The NFA and the Federation of Small Businesses (FSB) worked together to produce this estimate – the first of its kind. It is hoped that raising awareness of the scale of loss will spur new fraud prevention initiatives in this sector.

Individual citizens’ losses equated to 10% of the overall fraud figure (£4 billion), covering loss from mass-marketing fraud such as share sale, lottery and advanced fee frauds as well as newer frauds such as online ticketing and rental fraud.

Dr Bernard Herdan, Chief Executive of the NFA, said:

“Victims of fraud are found in all sections of society. Whether it is the public, private and charity sectors or as individual citizens, it is vital we join together to take action to stem the rising tide of fraud. The Annual Fraud Indicator is our blueprint. It enables us to gain a perspective and judge the scale of the problem and target our actions accordingly.

“Tackling fraud will not solely be achieved through more investigation, prosecution and punishment of fraudsters. The NFA is working with its partners to promote greater fraud awareness and self-protection, encourage organisations to adopt fraud proof systems, enable fraud reporting and facilitate better sharing of intelligence on fraudsters. We want to develop a stronger counter fraud culture, which helps to disrupt fraudulent activity across the UK and globally.”

Mike Cherry, Policy Chairman, Federation of Small Businesses, said:

“The Federation of Small Businesses (FSB) was pleased to collaborate with the National Fraud Authority in capturing the cost of fraud to small businesses – around £2,800 per business, per year. These costs can hamper enterprise for small firms when in fact the Government are looking to them for economic growth and job creation.

“The FSB is calling on small businesses to report fraud to the Action Fraud – in the knowledge that this information will be used to build up a full picture of fraud with prosecutions as a result. Despite public sector cuts, small businesses still need to see an improvement in the capability of the police when dealing with these issues locally. Importantly too, we must see an end to the ‘passing the buck’ scenario when a fraud involves more than one police force.”

Nick Starling, Director of General Insurance and Health at the Association of British Insurers, said:

“Every household and business pays the price for fraud. The cost of insurance fraud alone adds an extra £44 a year to the insurance costs of the average household. To protect honest customers, the insurance industry is intensifying its efforts to deter potential fraudsters, and detect more fraud. With many frauds cutting across different sectors, the National Fraud Authority has a crucial role to play in spearheading a coordinated national strategy to reduce the impact of fraud on the economy and people’s lives.”

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