F&I Management & Training

For the first time in its seven-year history, the Fraudtrack survey, from accountants BDO, has reported half-year fraud at more than £1bn. That’s up on last year’s figure and nearly twice as much as for the same period in 2008.

The average cost of each case is up from £5m to £6m and mortgage fraud – now a big business for organised crime – accounts for 20% of cases.

But the crooks are getting better at covering their tracks – despite the fact that it is notoriously hard to nail fraudsters. Hiding fraud by setting up companies within companies to make it harder to spot what’s really going on is one of this year’s hot trends, according to the survey.

So what’s going on? Has the recession made it so hard to turn an honest crust that the nation is turning to nefarious practices instead? Or are employees simply so peeved at the way their employers have behaved during the hard times that they have determined to take ‘compensation’ into their own hands?
Neither, according to Simon Bevan, head of BDO’s fraud services unit, at any rate, who said it’s all a matter of detection.

Fraud, he reckoned, is more or less constant throughout the economic cycle, but rates of discovery go up when money gets tight. Partly due to more thorough scrutiny by cash-strapped firms of their own accounts, partly because of heightened regulatory interest, and partly because there’s a ready supply of newly redundant employees ready to blow the whistle on former colleagues involved in sharp practices.

So it’s more a case of fraud committed while no one was looking during the boom years now coming to light well after the bubble has burst. And if the age of austerity results in a cleaning up of corporate fraud and a general tightening of firms' internal audits and controls, that might not be such a bad thing after all. It’s an ill wind that blows nobody any good.

DATED: 21.07.10

FEEDD: MgmtT