Reported fraud to treble to £5bn over next two years

Tuesday 12th January 2010

The latest Fraudtrack survey from business advisers and accountants BDO has revealed that the amount of money lost by businesses and the public sector to fraud jumped by 76% during 2009 to over £2 billion.

Mortgage fraud accounted for 18% of this, whilst the number and size of frauds has shot up sharply. In fact, 2009 marked the biggest rise in fraud since the Fraudtrack survey began seven years ago and the average value of each fraud now stands at more than £5 million. In 2003 the average value of each fraud was £1.8 million.

Worryingly, the group has warned that the 76% spike is just the tip of the iceberg, as more fraud will be uncovered as the recession tails off. Tighter cash flow and higher levels of scrutiny from management means fraud will be less easy to hide than in the years of property booms and loose credit.

BDO has even said that annual reported corporate fraud could soar to £5 billion within a couple of years.

Simon Bevan, head of fraud at BDO, warned that a large number of frauds haven’t been recognised by banks yet, and are still being classified as non-performing loans.

He added: “Based on my experience of the two previous recessions, I expect that reported fraud will treble over the next two years. There has always been a lag effect, with reported fraud continuing to rise for at least a couple of years after businesses start to come out of the recession.

“A large part of this will be a tidal wave of fraudulent borrowing that has only just started to appear, particularly through use of over-valued properties as security for loans, while the property market was booming.”