- Security TWENTY
- Women in Security
Fraud, which is now the UK’s most common criminal offence, and the scale of the problem is such that the cost of fraud to the UK is greater than the gross domestic product of 148 out of 191 countries. That’s according to a study, by Crowe Clark Whitehill, Experian and the Centre for Counter Fraud Studies at the University of Portsmouth. It suggests that private sector fraud costs the UK economy £140 billion, while fraud in the public sector is estimated to cost £40.4 billion in 2017.
Fraud aimed at individuals amounts to £6.8 billion, while charities suffer losses of £2.3 billion. The private sector is most hit, largely due to the spend by private enterprises. Meanwhile public sector fraud is the easiest to measure and detect due to the reliability of tax and benefits data.
A significant proportion of the costs of fraud in the report are attributed to procurement fraud. Procurement accounts for a large portion of organisational expenditure and fraud can creep in at various stages of the procurement process. The rise in the incidence of fraud in registered charities is largely attributable to an increased expenditure on procurement, for example.
New trends have emerged that impact demography and type of fraud victim. Technology continues to open up new avenues for fraudulent activity. Online Banking fraud has grown by 226pc and Telephone Banking Fraud by 178pc in the past year, with many millennials increasingly being drawn into the fraudsters’ net.
Technology and legislative controls are also impacting behavioural patterns amongst fraudsters. Reformative measures such as the Payment Services Directive 2 (PSD2) will bring tighter regulatory controls and deter attacks, while new counter fraud tools are causing fraudsters to innovate and target platforms not governed by strong customer authentication.
Jim Gee, Head of Forensics and Counter Fraud at the accountancy firm Crowe Clark Whitehill, says: “The cost of fraud is clear – not just the proportion which is detected, nor a guestimate but accurate information about the total cost to UK plc, just like any other business cost. And that cost is £190 billion.
“Private companies are made less stable and financially healthy; as citizens we don’t get the quality of public services that we pay our taxes to receive; and even charities don’t get to spend the full value of the donations which people make. What other problem of this size doesn’t have a proper national response?”
Nick Mothershaw, Director of Fraud and Identity Solutions at the data checking firm Experian, says: “Awareness of the dangers fraud poses is growing, but the total of £190 billion is startlingly high. Plastic card and online banking fraud continues to increase, so new regulations which make it harder for fraudsters to use someone’s cards online are a necessary step. Fraudsters are shamelessly opportunistic and are now turning their attention to the pensions release, lured by the promise of high value returns when their scams are successful.”
And Prof Mark Button, Director of the University of Portsmouth’s Centre for Counter Fraud Studies, adds: “The 2017 Annual Fraud Indicator highlights again the colossal cost of fraud to the UK economy. At £190 billion it would represent more than the UK government spends on health and defence combined, or on all welfare payments, bar pensions.”
Richard Lowe, Director of Financial Services of SQS, says this does not bode well for retail banking providers. Research from SQS shows that while 95 per cent of those who now bank online agree that it makes banking quicker and more convenient; however if they were to become a victim of fraud 55 per cent of the UK public would contemplate switching banking providers due to this betrayal of trust. “Technology has changed and will continue to change the way consumers bank; our research shows that the majority of customers have embraced and are reliant on online banking. As such, it is vital for banks to prioritise digital, online and support services for consumers, whilst implementing stringent protection mechanisms against fraud or run the risk of losing them as customers. The best way to retain trust and maintain customer loyalty is to embed quality assurance into every part of the customer banking experience to help fight fraud.”