The total value and volume of reported fraud in 2017 hit a 15-year high, with the value of fraud increasing 538pc to £2.11bn according to the latest analysis by an accountancy and business advisory firm. BDO LLP examines reported fraud cases of more than £50,000 in the UK. The number of reported fraud cases has more than doubled to 577 in 2017 from 212 cases in 2003 – an rise of 172pc. The average value of fraud has also more than doubled, to £3.66m from just over £1.5m in 2003.
However, the pace of growth in the value of fraud has slowed, increasing by 6.5pc to £2.11bn. This is down significantly on the previous year’s increase where the value of reported fraud rose by 31.5pc to £1.99bn.
In the last year, the financial services sector has seen the largest increase as the total number of cases rose by 72.4pc and the value of fraud has risen by 318.8pc to £899.7m. In 2017 in the charity sector, the value of fraud quadrupled to £8.5m, up from £2.1m in 2016, as the number of reported cases almost doubled.
In contrast, public administration fraud saw a 73.2pc drop in value to £368.5m from £1.37 billion in 2016. This was due in large part, however, to the absence of a single £1bn VAT ‘carousel fraud’ case in court in 2016.
The greatest increases over the past 15 years have occurred in real estate, rental and leasing fraud, with the total value shooting up to £276.5m from £1.08m, and retail trade fraud, which has grown from £15.5m to £337.3m. The value of educational services fraud also rose significantly between 2003 and 2017, albeit at a much lower level, rising from £6.98m to £31.53m.
Comment
Kaley Crossthwaite, Partner and Head of Fraud at BDO, said: “While a significant amount of fraud still goes unreported, our research suggests that people are becoming a lot more courageous in coming forward to report it and recovering their assets through the criminal or civil justice systems. There is now an expectation that fraud will be reported and investigated, both internally by corporations, charities, public sector entities and companies operating within regulated sectors. Stakeholders are seemingly no longer content to simply sweep fraud under the carpet in the hope that it will all go away.”
Regions
London and the South East remains the biggest hotspot for fraud in the UK in 2017 with the number of cases up by almost 30pc to 176, and the total value increasing by 76.9pc to £1.63bn. Two of the biggest frauds were a family of VAT scammers who stole £45m from taxpayers and lavished it on a fleet of luxury cars, race horses, gambling trips to Las Vegas and mansions; and a complex £121m scam where two city traders became motivated by greed and used sophisticated means to defraud a Russian bank.
The Midlands continues to remain the largest hotspot for fraudsters outside London, with a 38pc increase in the number of reported fraud cases since 2003 but an overall fall in the average value of fraud from £6.8m to £3.2m. The average value of fraud in the North West has increased by 255pc to £1.68m, with tax fraud accounting for more than 56pc of the total value of all reported cases in the region.
Sat Plaha, Partner and National Head of Regional Forensic Services, said: “Whilst the regions outside London have experienced a fall in the total value of fraud in 2017, the 16pc increase in the reported cases of fraud in the regions shows the growing risk of fraud. The rising economic pressures and the continuing sophistication in technology mean that fraud is still a contemporary risk for most businesses, and therefore it is essential that businesses continue to deploy a proactive risk-based approach to protect themselves from harm’s way.”
Greed remains the greatest driver of fraud across the UK with 18.9pc of cases stemming from human avarice. After greed, gambling and debt were the largest contributing factors to reported fraud with 33 and 19 cases respectively out of a total 577.
In 2017, the research highlighted a number of instances where celebrity endorsements have been used to lend credibility to scams, as well as cases where celebrities have either been victims of fraud or – in the case of a former rugby player – part of the defrauding process. One of the biggest celebrity-related frauds was a £100m tax scam in which 730 celebrities, including comedians, sports stars and relatives of politicians, were conned into believing they were investing in research and development reforestation projects in Brazil and China.
The accountancy firm also points to a significant increase in counterfeiting fraud, whereby products such as designer clothes, accessories, electricals or cosmetics are fake brand copies but sold as authentic, with the value up 201pc on 2016 to £16.9m, and the number of cases up 375pc from four to 19.
Kaley Crossthwaite added: “There is a common misconception that you will be able to spot a fraudster – you can’t. Our research shows that anyone can be a victim, including celebrities, rich and poor alike. The old saying “If it looks too good to be true it probably is”, is so important to remember – don’t be taken in by luxurious brochures or fancy websites or celebrity endorsements – it may all be a sham.”
