Since 2003, BDO’s Forensic Services team has been tracking reported fraud cases valued at over £50,000 in the UK. Each year we analyse the nature of reported fraud from a variety of open news and reporting sources. We have witnessed and studied the rise of the value of fraud from just over £1.5 million in 2003, to over £2bn in 2017.
Our 2018 FraudTrack report looks into the data in close detail – where are the regional hotspots for fraud this year, and what does that mean for the UK as a whole? Why are some sector groups, such as retail and financial services, seemingly easy targets?
We also look at the new technologies that are developing at a rapid pace to fight fraud and the new methods that authorities are implementing to crack down.
Sector peaks and troughs
Our research demonstrated that fraud in the financial services sector increased dramatically in 2017, rising 318% to a value of just under £900m. The increase in fraud in the financial services sector will be disappointing to financial services firms, many of whom have been proactive in their approach to counteract fraud. The increase will also be of concern to the regulators, who have focused on tightening accountability in the sector for some time to mitigate fraud risks.
We witnessed other dramatic increases in the public administration, charity, and retail sectors. Public administration, although still affected significantly, experienced a large drop in the value of its fraud due to one particularly large VAT fraud that occurred in 2016.
London and the South East remains the biggest hotspot for fraud in the UK in 2017, with the number of cases up by over 10% to 176, and the total value increasing by 326% to £1.63bn.
The Midlands is the largest hotspot for fraudsters outside London, with a 38% 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 most common attributable motive for fraud remains the desire for luxury goods, holidays and generally an upmarket lifestyle. In nearly all of the cases analysed, the fraudster would inevitably splash their newly found cash on fleets of luxury cars, designer goods and expensive trips abroad.
One family of VAT scammers stole £45m from taxpayers and lavished it on a fleet of luxury cars, race horses, gambling trips to Las Vegas and mansions around the world. Another young woman conned pensioners out of £2m to fund her luxury lifestyle of eating at top restaurants and trips to the races.
A couple of cases stood out demonstrating that even the most well respected local figures can be caught up in fraud:
- A group of elderly nuns are accused of fraudulently profiting by up to £31million from the sale of a plot of land. The case continues and the nuns’ lawyers are proceeding to defend the claim.
- A former vicar appeared in court charged with stealing £163,000 from the diocese of Liverpool – again, the case continues.
Today, fraud seems to be growing at a magnitude that is beyond what we can effectively control and manage and it affects individuals and businesses of all sizes. The predictions within our first report in 2003 were correct – fraud happens, and the keys to challenging it and being vigilant against it are down to us as individuals. Businesses and individuals today have more resources than ever in the fight against fraud.
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.
Read BDO’s 2018 FraudTrack report 2018.
Kaley Crossthwaite is Partner in the fraud and investigations team at BDO.