LONDON - UK frauds reported were up14% last year but represent the tip of a financial crime iceberg, as the recession reveals an increasing number below the waterline. Reported frauds stood at £1.19 billion in 2008, up from £1.04 billion in 2007. The 2009 figure is expected to be higher still, according to the FraudTrack report released by BDO Stoy Heyward.
"This is just the beginning, we will see more and more fraud being uncovered in the next two years and some of these will be stunning in their size," says Simon Bevan, the study's author and head of BDO Stoy Hayward's national fraud services team.
"Out of the hundreds of investigations I have carried out, less than 5% have gone through the criminal courts," says Bevan. "We will see corporate vessels running aground not just because of economic conditions but also because they have been defrauded. Our own experience is that FraudTrack only shows the tip of the fraud iceberg. I am certain that once a recession bites, many more fraudsters will be uncovered."
The focus is especially on financial and insurance firms, where reported frauds have risen by 83% to £788m - 66% of the UK total - as fraudsters gravitate to where the most money is concentrated.
"The financial and insurance sectors are where the money is. It is no surprise that this sector suffers the most," says Bevan. "Frauds, particularly in commercial lending, where banks will find they have been misled as to the value of properties taken as security for loans, will increase."
The heightened risk is especially marked for retail firms; for whom reported frauds have increased by 62% over the past two years.
"The increase in fraud on retailers is terrifying," says Bevan. "We have recently seen high street names fall and it is frightening to think others could fail because retailers are increasingly being targeted by fraudsters."