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Case Studies

Fraud report

The total value of reported fraud in 2015 was £1.5bn, an increase of 110pc from the previous year, and the highest value since 2011, according to an accoutancy firm. The latest FraudTrack report from BDO, which examines reported fraud cases over £50,000 in the UK, finds that the total number of cases, however, fell by 5.2 per cent, with only 519 reported cases in 2015 compared to last year’s 546 cases. The average value of fraud meanwhile has risen 121 per cent to £2.9m with some of the largest cases brought to court reaching over £250m.

Financial services continues to be the sector attracting the highest level of fraud. The value of reported fraud in this area more than doubled, from £238m in 2014 to £567m in 2015. 2015 saw a small number of very high value values which impacted the sector’s results, as the volume of fraud fell by more than 40 per cent, with 70 cases in 2015 down from 119 cases in 2014. Third party fraud within financial services showed the largest increase in value year on year, with a £197m increase in reported fraud in 2015. In 2015, the £210m of third party fraud within the sector, included a fake invoices case, an investor con and a £142m case where six businessmen were charged with conspiracy to commit fraud on broadband installation contracts against financial institutions.

The second biggest increase in the financial services sector was in mortgage fraud. Despite the number of cases almost halving from 24 in 2014 to 13 in 2015, the value of fraud almost tripled from £57m to £151m due in large part to a £130m mortgage fraud case in the North-East.

The trend of reported cases falling against a rise in value continued with money laundering, which showed the third biggest change with a rise of £85m in fraud from 2014 to 2015. Again, this was down to one large money laundering case of £145m money involving a London bureaux de change. The financial services sector did see a decline in employee fraud cases compared with 2014. The number of cases fell from 31 to 15 with the value also falling from £9m to £4.5m.

The report’s author, Kaley Crossthwaite, Partner and Head of Fraud, BDO LLP, said: “Whilst the value of financial services fraud would appear to have jumped sharply, the numbers have been skewed slightly due to a small number of very large cases. Stripping these ‘exceptional’ items out would show an apparent fall in volume and value year on year. Sadly this is not the full picture. Increasingly we are seeing high value complex fraud being dealt with outside of the judicial system as companies prefer to deal with these situations behind closed doors to avoid the reputational damage to their businesses. Our experience would suggest that both volume and value in real terms continue to rise despite efforts by companies in the sector to strengthen their processes.”

In terms of fraud per location, London and the South East continues to grow as the hotspot for reported fraud in UK, with the value of fraud in the area increasing to £600m in 2015 from £483m in 2014, and accounting for 40 per cent of all fraud overall. However, while London & South East remained at the top of the table, the most substantial increases regionally were seen in the Midlands, Yorkshire and North East England. Fraud in the Midlands rose more than 11 times from £33m in 2014 to £384.5m in 2015 with the number of cases rising 25 per cent from 70 to 94. Fraud in Yorkshire meanwhile, rose from £49.5m in 56 cases to £208.5m from just 39 cases. The North East rose from £18.2m in 22 cases in 2014 to £138m from 19 cases in 2015.

Kaley Crossthwaite said: “As the financial capital of the UK, London has long been a hotbed for fraud and the 2015 data shows no sign of this abating. The most alarming findings are the very sharp increase in the level of fraud in the Midlands and the North East. Tax fraud and Money Laundering in these regions have been the key drivers of this increase led by a £262m Birmingham reported tax avoidance scheme taking advantage of government breaks for the film industry.”

Prosecutions against non-corporates or individuals have continued to grow in 2015 having risen in both volume and value every year since 2012. In 2015 there were 152 reported cases of reported fraud with a total value of £277m up from 96 cases totalling £101m in 2014. An analysis of these fraud shows that the majority were committed against the elderly and vulnerable. Two of biggest frauds in this area included a £9m Ponzi scheme operated by a former Premier League footballer, and a £1.8m Ponzi scheme operated by a London banker. The biggest non-corporate fraud overall was a £130m foreign exchange fraud case in Yorkshire.

The main driver for the increase in the value of fraud in the retail sector, which grew from £30.7m in 2014 to £48.1m in 2015, was due to one large money laundering case, whereby a gang used bogus clothing and textile companies to launder £35m worth of drug money. By removing this one case, the value of reported fraud in 2015 was only £13m from 31 cases (average value per case £423k), which indicates a decline compared to 2014 with 32 cases where the average fraud per case was £578k. Kaley Crossthwaite added: “The low number of reported cases in the retail sector is an indication that most fraud is dealt in-house and not reported, due to the reputational damage and potentially a further loss of profits as customers lose trust and security in the retailer who holds their personal data.”

For a blog from Ruth Ireland Partner – Risk and Advisory Services at BDO on social engineering fraud, visit the BDO website.


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