UK fraud is growing into a multi-billion pound industry as criminals have taken advantage of a lack of police resources and low prosecution levels to target businesses, consumers and the government.
Many of us may have experienced fraud on a relatively minor level – credit cards being used to finance shopping sprees abroad, or bogus e-mail trying to elicit our security details. But industry experts say few people realise the true scale of fraud and the impact it is having on the UK economy.
The actual cost of fraud is almost impossible to quantify as only a fraction of that committed is reported and only a fraction of that is prosecuted. Norwich Union, the insurer, has put a £16bn price tag on fraud committed in the UK last year – this translates to almost £1 per adult per day.
The company’s research shows that the most common types include fraudulent internet and telephone purchases, customs and benefit fraud and inflating the value of stolen goods for insurance claims. But fraudsters are also getting away with more innovative, costly and hard to detect scams.
Norwich Union says there has been significant growth in the number of staged motor accidents and arson on buildings, and the insurer also highlights the theft of intellectual property rights and bribery to win corporate contracts overseas.
Paul Carratu, president of the Association of Certified Fraud Examiners in the UK, says: “This is a major problem for British industry as a whole – there isn’t one type of business that is not affected.” He adds that in the absence of a scandal such as Enron in the UK, businesses have been slow to realise what impact fraud could have.
Chris Hill, head of fraud at Norwich Union, says the lack of police resourcing for tackling fraud and the absence of any national statistics that quantify the scale of it are key problems. “The issue is lack of awareness,” says Hill. “People think fraud is a victimless crime. Its low profile with the police, the press and the public creates an ideal environment for it to proliferate.”
Fraud essentially falls outside the radar of the police and prosecution levels are low. The City of London Police is the only force in the UK that has fraud as a priority.
Steve Wilmott, head of economic crime at the City of London Police, says his force has almost doubled over the last year and there is a lot of research going on in the industry to improve the way fraud is tackled. The Office of Fair Trading has also recently set up a “scam busters” team to target areas such as mass marketing e-mails used to gain security details.
In October, the government launched a review into fraud to assess the most effective ways of dealing with the issue but currently there are no government targets or statistics published.
Norwich Union estimates that £11.5bn was siphoned out of the public sector last year – £4.8bn in benefit fraud, £2.8bn in customs and excise fraud and more than £2bn in tax fraud.
David Alexander, partner at Alexander Forensic Accounting, says: “If someone is defrauding the taxman or customs and excise, there is less of a sense of guilt as they believe nobody is really getting hurt.”
But these types of frauds are actually costing consumers millions every year through increased taxes, insurance premiums, higher levels of borrowing and reduced government expenditure. Fraud costs the insurance industry alone more than £1bn per year, according to the Association of British Insurers, and most of this is passed back to consumers in premiums.
But there are some steps consumers and businesses can take to help protect themselves against fraudsters, especially in the run-up to Christmas – a traditionally fertile time as companies’ defences can be lower and online shopping increases.
“The biggest defence is education,” says Alexander. “Companies must make employees aware of what fraud looks like and the impact it could have on the company.”
He adds that staff should be on the look out for large orders and should make sure they verify exactly who they dealing with and conduct appropriate due diligence.
Retail Decisions, which produces anti-fraud software for retailers, expects online fraud to peak at a rate of 5 times the normal level on Christmas Eve, with fraudsters buying the latest gadgets and high value gift vouchers.
Experts advise consumers to confirm the validity of any internet company they are buying from and realise that if a deal looks too good to be true, it probably is.
