- Security TWENTY
- Women in Security
The UK is suffering a national fraud pandemic totalling £110 billion a year, according to the authors of an annual study. For context, says the audit, tax and advisory firm Crowe Clark Whitehill, and the University of Portsmouth’s Centre for Counter Fraud Studies (CCFS), that total would build more than 110 Wembley Stadiums, or cover the annual budget for every council in England combined. Put differently, the figure would cover the UK’s Brexit divorce bill almost three times over, or cover the salaries of 4.8 million nurses for a year.
‘The Financial Cost of Fraud 2018’ estimates that the UK economy could be boosted by £44 billion annually if organisations step up efforts to tackle fraud and error. Globally, fraud is costing £3.24 trillion each year, a sum equal to the combined GDP of the UK and Italy.
The 20-page report covers 40 sectors, where the total cost of fraud has been measured across spending totalling £15.6 trillion. Since 2008, there has been a 49.5pc increase in average losses with businesses losing an average of 6.8pc of total expenditure. Driven by technology and increasing digitisation, businesses now face a threat which is growing in scale and mutating in complexity, the report authors warn.
They describe fraud as the last great unreduced business cost. Included in the report are examples where fraud has been accurately measured, managed and losses minimised, including a major mining company which reduced losses due to procurement fraud by over 51pc within two years, equating to $20m at a time when commodity prices were falling.
Jim Gee, Head of Forensic & Counter Fraud at Crowe Clark Whitehill, says: “The threat of fraud is becoming increasingly like a clinical virus – it is ever-present and ever-evolving. The bad news is that digitalisation of information storage, and process complexity, coupled with the pace of business change, have created an environment where fraud has thrived, grown and continued to mutate. The better news is that there are examples where organisations have measured and minimised fraud like any other business cost and greatly strengthened their finances.
“In the current climate, to not consider the financial benefits of making relatively painless reductions in losses to fraud and error is foolhardy. The message to all organisations is measure, mitigate and manage fraud, or your bottom line will continue to suffer.”
Prof Mark Button, Director of the Centre for Counter Fraud Studies at Portsmouth, adds: “This research shows that the most accurate measurement of fraud in organisations continues to show an upward trend. Many organisations are losing significant amounts to fraud and much more can be done to reduce losses. Organisations could do much more to enhance prevention through a number of measures such as effective vetting of new staff, investing in data analytics and developing an anti-fraud culture.”