2 April 2012
Fraud in Britain, this year, will cost more than £73 billion – that is £1,500 for everybody of working age.
The National Fraud Authority’s annual fraud indicator released last week is substantially more pessimistic than in previous years. The NFA calculates that increasingly effective technology will reduce tax revenue lost to fraud but in all other sectors losses are worsening.
The private sector will lose £45.5 billion – with shops, manufacturing and financial services being badly hit – followed by insurance and mortgage fraud.  Perhaps not unsurprising as the Financial Services Authority has identified that senior managers’  are incompetent in corruption matters and that only 2 of 15 banks visited have carried out an anti-corruption audit – according to the  Guardian.
Individuals will lose more than £6 billion – much resulting from identity fraud, “Nigeria-like” scammers and bogus tickets for sporting events. And of course the ATM fraud involving more than $1 million skimmed from the accounts of Aucklanders is a local example.
Of more than £20 billion lost in the public sector, the taxman will be defrauded of £14 billion, but major losses will come from procurement fraud in central and local government.
The National Crime Agency hopes promotion of these figures will change public perceptions that fraud is largely victimless. It has a strategy called Fighting Fraud Together involving nearly 40 enforcement agencies.
The report highlights the extent of “insider-enabled” fraud. Although lower than the international figure where 60% of identified fraud is committed by insiders, in Britain a third of respondents to a KPMG survey indicated that their largest fraud was committed by an employee. “Dishonest action by staff to obtain a benefit by theft or deception” is distressingly common.
The report restates the increasingly recognised characteristic of organisations, that fraud is under-reported. There is a reluctance to accept that employees breach the trust put in them. More than 25% of organisations treat employee fraud in an informal way either doing nothing, moving the offender to a different job, or just issuing a warning.
The US Justice Department disclosed last week that it is prosecuting four Navy procurement officials and three defence contractors for a scheme rewarding the officials with more than $1 million for approving the payment of invoices that had been padded by more than $5 million. In true Al Capone style the charges are not only fraud-related but include tax offences of failing to report the value of benefits! The prosecution resulted from information provided to the agency hotline.
The Auditor General’s report in 2011 on the “Cleanest public service in the World” disclosed a high percentage of insider-enabled fraud in New Zealand agencies. Although the scale is more moderate than international averages, about 80% of uncovered fraud in agencies was the work of an insider.
Explicit guidance from the OAG is that agencies are to report suspected fraud to the appropriate law enforcement agency to decide whether criminal proceedings should be instituted. “It is for the law enforcement agencies, not public entity managers, to decide whether or not a person should be prosecuted.”