Thursday, September 02, 2010
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"Risk Management"
Procurement scams decline but overall UK fraud tops £1bn
Despite a decline in traditional procurement fraud, where firms are overcharged for goods and services, fraud in the UK has exceeded £1bn for the first six months of this year, eclipsing previous half-year figures. Experts have pointed to more sophisticated scams such as revenue dilution fraud and insider dealing as increasingly prominent trends.
Simon Bevan, head of the Fraud Services Unit at BDO, said: "In the past we have seen a focus on procurement type frauds - that is public and private sector organisations paying too much for goods and services. However we are now seeing more 'revenue dilution fraud' - where management commits fraud by either setting up 'companies within companies' or diverting lucrative contracts away from the company to third party accomplices. Linked to this is an increase in insider dealing."
The growth of fraud in the UK "continues unabated", according to BDO LLP's six-monthly update on reported fraud. For the first six months of this year fraud losses rocketed to £1.06bn, almost the same as for the whole of 2008.
According to BDO, this is the first time fraud levels have soared above the £1bn barrier during the interim period in the seven years BDO has been conducting its survey. The average value of a single fraud has increased to almost £6m, from £5m last year.
"It shows that fraud is on the increase and BDO fully expects this to be another bumper year. In particular, BDO expects more enforcement action by regulators in the financial services arena with enforcement action for insider dealing also becoming more prevalent," BDO stated.
Bevan predicts that competition between regulators to 'act tough' will increase: "We have a combination of political pressure and the understandable desire, in a downturn, for the public sector and corporates to be seen to have a zero tolerance policy."
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