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Fraud is costing businesses and individuals in the UK £137 billion each year. That is according to research by the audit firm Crowe. Its ‘Financial Cost of Fraud Report’, with the Centre for Counter Fraud Studies (CCCF) at the University of Portsmouth, points to how in every sector of every country, fraud has a serious and detrimental impact on quality of life. Yet for many organisations, fraud is a problem that can be tackled, according to the auditors. The report shows that losses can be, and have been, reduced by up to 40pc within 12 months. It is estimated that, were organisations in the UK to correctly measure and introduce actions to reduce fraud, savings of up to £55 billion could be made annually. As a comparison, this sum is greater than the UK Government’s spend on defence in 2019-20.
Jim Gee, Head of Forensic and Counter Fraud Services at Crowe, said: “New and diverse threats have conspired to ensure that the UK and global economy have suffered rising losses each year, and action to prevent, mitigate and combat fraud has not kept pace. Fraud needs to be viewed as a business cost. In almost every other area of business life, organisations know, measure and manage their costs. Fraud should be no different, particularly considering the numbers involved.
“These sums are stark, but may be hard to grasp. In the UK alone, the amount lost to fraud outweighs the wealth of Jeff Bezos, while the amount lost to fraud globally represents more than twice the UK’s entire GDP.
“Too many organisations adopt a reactive approach to fraud, seeking only to tackle it once losses have already occurred. That’s an antiquated viewpoint and a change of perspective is needed. Fraud is an ever present, high volume, low value problem and only a small proportion is detected. The question is not if it is taking place, but at what level. By understanding the nature and scale of the cost, we can reduce its impact – enhancing the profitability of companies and ensuring better funded public sector and charitable organisations.”
Prof Mark Button, pictured, Director of the Centre for Counter Fraud Studies, University of Portsmouth added: “Many organisations do not realise the true extent of the problem and it is essential to try and grasp this, to develop effective strategies to deal with it. This report highlights these risks showing the continuing upward trend and should be a prompt to many organisations to invest in measuring the size of the problem to then tailor appropriate strategies and controls to deal with it.”
This report comes after Jim Gee was among the speakers at the CCCF’s annual counter-fraud conference. More in the August 2021 print edition of Professional Security magazine.