Britain Business Fraud Costs Economy $155b p.a.
Annual UK business losses from fraud and error hit a record £125 billion ($155 billion) as fraudsters increasingly take advantage of technology and corporate inaction.
The financial cost of fraud 2017 survey produced by Crowe Clark Whitehill and the University of Portsmouth’s Center for Counter Fraud Studies shows that since the recession in 2008 there has been a 43% increase in fraud. Average fraud losses are now equivalent to 6.5% of business expenditure, up from 4.6%.
The research reviewed 19 years of data covering loss measurement exercises in different countries and across different sectors. The total value of the expenditure where losses have been measured is over £13.2 trillion (16.38 trillion), news outlets reported.
Jim Gee, head of forensics and counter fraud at Crowe Clark Whitehill, said: “The sums involved are huge. Organizations’ behavior towards measuring and countering fraud can be the difference between a mediocre annual performance and stable growth. Businesses can no longer afford to bury their heads in the sand.”
The report suggests that the steep rise in fraud since the end of the recession may be down to the greater complexity of processes and systems, making it easier to disguise fraud, as well as the fact more transactions are being undertaken by computer and so are vulnerable to cyber attack.
The publication coincided with the official opening of the government’s National Cyber Security Center. Speaking at the launch, Chancellor Philip Hammond said in the first three months of its existence, the NCSC has responded to 188 attacks.
“The most dramatic threats are the sophisticated, state-sponsored attacks. But the most common threat that businesses and the general public face are the less sophisticated, mass targeted attacks, from phishing to email viruses.
“The ONS estimate that there were two million such incidents in the past 12 months alone. If these numbers were included in our crime figures, the UK’s crime rate would double,” Hammond said.
He highlighted official statistics showing 65% of large businesses reported a cyber breach or attack in the past 12 months, while nine out of 10 businesses admit to not having an incident management plan in the event of such a breach.
The treasury has committed £1.9 billion to address cyber security over the life of this parliament and plans to work in partnership with business to reduce levels of cyber attacks.
Hammond said: “We will invite businesses to second up to 100 employees to come and work in the NCSC—allowing us to draw on the best and the brightest in industry—to test and to challenge the government’s thinking as we take this project forward.”
Fraud investigations involving foreign aid have quadrupled over five years as more public money is given to “fragile” countries, Whitehall’s spending watchdog, the National Audit Office, has found, City A.M. online reported.
Reforms introduced by ex-prime minister David Cameron to increase funding and assign it to unstable nations have increased the risk of wrongdoing, according to the NAO.
In a report released early last week, the NAO said it was “particularly challenging” to detect fraud in more than half of the spending of the Department for International Development spend because the money was routed through other international organizations, such as the United Nations or World Bank.
Financial crimes in United Nations organizations are believed to be under-reported and the problem could be “significant and endemic”, the report said. Auditors also outlined the difficulties facing officials when operating in countries where bribery can be seen as a “cultural norm”.
Under Cameron, the government committed to spending 0.7% of national income on international aid, which came to around £12 billion last year. As part of the 2015 Strategic Defense and Security Review, DfID was ordered to spend at least half of its money on “fragile states and regions” until 2020.
This was seen as a significant shift among the aid community, which was worried that the UK government was raiding the aid budget to bolster defense and security.