Fraud breaks the 2billion pound barrier
Reported fraud in the UK exploded in 2009 and broke the 2billion barrier for the first time according to new research from accountants and business advisers BDO LLP. The amount lost by businesses and the public sector to larger frauds increased last year by a startling 76 per cent during the recession, with both the number and size of frauds increasing dramatically.
BDO LLP (one of the UKs largest teams of specialist fraud investigators) predicts that, unfortunately, this 76 per cent rise is just a indication of things to come, and warns that annual reported corporate fraud could be as high as 5billion in a couple of years, as more fraud is discovered both through management being focussed by the recession on questioning costs, and because tighter cashflow and credit makes fraud harder to hide.
Simon P. Bevan, Head of Fraud at BDO LLP, commented: 2009 saw the steepest increase since our report began seven years ago, with the average value of each fraud now over 5million compared to 1.8million in 2003.
Based on my experience of the two previous recessions, I expect that reported fraud will treble over the next two years. There has always been a lag effect, with reported fraud continuing to rise for at least a couple of years after businesses start to come out of the recession.
A large part of this will be a tidal wave of fraudulent borrowing that has only just started to appear, particularly through use of over-valued properties as security for loans, while the property market was booming. Currently many of these frauds are yet to be recognised by the banks, which still have them classified as non-performing loans.
It is only when specialist recovery departments start thorough investigations and eventually litigating against alleged dishonest borrowers and their complicit advisors that the true nature of these potentially horrendous fraud losses.