View more on these topics

Cost of fraud climbs to all-time high in 2011

The value of reported fraud increased by 50% in 2011 to reach £2bn, according to accountancy firm BDO’s latest FraudTrack report.

This is the highest ever figure recorded by BDO’s annual survey, which says there has been a seven fold increase in the cost of reported fraud since 2003, when it totalled just £331m.

There was also a considerable rise in the number of reported cases, from 372 in 2010 to 413 in 2011.

However, fraud in the finance and insurance sector fell significantly as a proportion of all cases. It accounted for just 27% of all reported fraud in 2011, compared to 56% in 2010, representing its lowest percentage in five years.

Simon Bevan, head of fraud at BDO, says this decrease suggests that financial services firms’ recent investment in systems and technologies to prevent and track fraud is paying off.

But he warns that there is still much work to be done and that the biggest fraud risk to financial services firms comes from their own staff.

He says: “The most serious frauds, in terms of financial loss, in financial services are often committed by employees and management.

“Yet most of the inhouse fraud teams within banks etc tend to be made up of ex-policemen. They are often too focused on external ‘criminals’ dealing with credit card fraud and phishing, when the greatest risk is internal with banks’ employees committing commercial lending, mortgage or rogue trading fraud.

“It is this failure to take a holistic approach to tackling fraud that can lead to those high profile, costly incidents that we have seen in recent years.” 

In terms of the overall rise in reported fraud, Bevan says this is a worrying, but not surprising, trend.

He says: “When the economic climate is difficult there is even more focus on the bottom line and driving out unnecessary costs, so fraud is more likely to be uncovered.

“But organisations need to be much more proactive when it comes to preventing fraud. Too often risk teams are either too externally focused or fail to look at fraud from a financial point of view.”

Recommended

Stormy waters leave forecasters all at sea

For the last couple of years, the mortgage market has traded in a very narrow range. Last summer showed some signs of an underlying improvement in volumes but the onset of the euro crisis and extremely disappointing UK economic growth figures have dampened any prospect of recovery.

November’s 2.5% drop in mortgage approvals fuels future lending fears

A fall in the number of mortgage approvals in November has triggered concerns over lending levels for the coming months. Figures published by the Bank of England last week show that an 8.4% decline in the number of remortgage approvals in November, down to 31,154 from 34,004 in October, caused a slight drop in the […]

Paragon reduces rent income requirements for B2L deals

Paragon Mortgages has lowered its rental income requirement and launched a new range of products. The lender is reducing its rental income requirement for single unit properties from 130% at 7% down to 125% at 5%. Its calculation for houses in multiple occupation and multi-unit properties remains at 130% at 7%. A spokeswoman for the […]

Brexit and the mid cap buying opportunities

Video update from Mark Martin, Head of UK Equities, Neptune Investment Management With the Brexit referendum scheduled for 23 June, how much risk is priced into the market and is the current volatility a long-term buying opportunity? Watch Mark Martin, Head of UK Equities, and Holly Cassell, Assistant Manager on the UK Mid Cap and […]

Newsletter

News and expert analysis straight to your inbox

Sign up