The amount lost by UK companies to fraud fell in the first part of the year, according to a new study.
The report by BDO, the professional services firm, shows that incidents of publicly reported fraud reached about £920m ($1.5bn) between December 2010 and May 2011 compared to £1.06bn in the equivalent period between December 2009 to May 2010.
However, BDO suggested the data, which is published every six months, may indicate that financial companies are increasingly choosing to handle wrongdoing such as procurement fraud through civil lawsuits or internally rather than publicly reporting it to the police or authorities.
Some companies prefer to handle problems such as employee theft, accounting misdeeds and kickback payments privately.
Simon Bevan, head of fraud services at BDO, noted that procurement fraud – one of the most common types of malpractice – was reported twice during the period compared to theft, which was reported 59 times.
“Do these figures indicate that less fraud is happening?” he said. “Not in my view. Rather, we think this represents a reluctance to report fraud to the authorities, particularly in the financial services sector. As the old adage goes, 90 per cent of fraud goes unreported – so this isn’t particularly surprising.”
He said that more financial companies may be taking the decision to recoup lost money by taking civil proceedings and are less likely to risk reputational damage.
“The figures come at a time of stretched police resources and increasing uncertainty about the scope and role of regulators such as the SFO [Serious Fraud Office] and FSA [Financial Services Authority],” he said.
“It’s well known that the majority of fraud committed in the UK is procurement fraud, yet this is not what we’re seeing in terms of reported figures. What these figures indicate is that entities are self selecting which fraud they report. If it’s a simple cash fraud, it seems that organisations are more likely to go to the police, yet with a complex procurement fraud they are choosing to deal with the issue internally,” he added.
The figures show that reported fraud cases in the public sector almost doubled from £216m to £431m while the fraud reported in the insurance and finance sector almost halved from £524m in 2010 to £274m in 2011. Public administration cases now account for almost half of all reported fraud in the UK.
BDO is urging companies to take steps to prevent fraud such as scrutinising remote office locations and performing stringent background checks on new recruits.