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Credit crunch fuelling corporate fraud

Business fraud is being accelerated by the economic slowdown as figures reach record heights, according to a report by accountants and business advisers BDO Stoy Hayward.

The latest FraudTrack analysis shows that reported fraud cost UK businesses over £705m in the first six months of 2008, which is a 74 per cent increase on the same period last year. In April alone, the value of reported fraud was £317m.

Of the industries worst hit were the finance and insurance sectors, where fraud cost bankers and insurers more than £636m. This made up 90 per cent of the total cost of fraud in the past six months and is a 15-fold increase from fraud levels last year.

Making up 77 per cent of all reported fraud in the first of half of 2008 was that of fraud committed by staff and suppliers. Management fraud accounts for 46 per cent of fraud cases and third party fraud accounts for 32 per cent, costing businesses a total of £541m. Employee fraud also increased to 11 per cent of all fraud compared to 2.5 per cent in the same period last year.

"The combination of spiralling personal debt and desperate employees spells real danger for business. Especially when, sadly, our figures provide clear evidence that commercial organisations of all types and size throughout the UK are currently failing, in some cases quite spectacularly, to get to grips with the fraudulent activity of their staff," said Simon Bevan, head of BDO Stoy Hayward’s fraud services team.

"The fraud problem facing all UK business could be bigger still. These figures don’t even include losses that may have been incurred by rogue traders. When you add in the fraud that’s not yet been uncovered, or which businesses have discovered but don’t wish to expose, the real cost to UK industry could be much, much higher."

Bevan added that tougher custodial sentencing is needed and that UK sentences for fraud are still low when compared to other countries. "Given the sheer value of reported fraud in this country, our sentences are simply failing to reflect the severity of the crime and its impact on both businesses and individuals," he said.

This article was sourced from www.credittoday.co.uk