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.”