Annual Fraud Indicator 2017 highlights UK footing £190 billion annual fraud bill

The annual cost of fraud in the UK is £190 billion, which is equal to around £10,000 per family. That’s one of the main findings of the Annual Fraud Indicator 2017 published by Crowe Clark Whitehill and developed in conjunction with both Experian and the Centre for Counter Fraud Studies at the University of Portsmouth.

The 28-page Annual Fraud Indicator (AFI) 2017 highlights the colossal cost of fraud to the UK economy. Unless an organisation understands the nature and cost of fraud affecting it, how can it apply the right and proportionally resourced solution? How can it track progress in reducing the prevalence and cost of fraud? How can it understand the value derived from its investment in countering fraud?

The AFI has been developed to help create a benchmark by which, year-on-year, a sector-specific analysis can be made.

An in-depth analysis of fraud levels in the UK economy shows that annual fraud losses are indicated to cost £190 billion, private sector losses are estimated to be £140 billion, public sector losses are estimated to be £40.4 billion, charities and charitable Trusts are believed to be losing £2.3 billion and frauds committed directly against individuals are estimated at around £6.8 billion.

These numbers are far from insignificant. With the latest National Audit Office and National Crime Agency statistics confirming that fraud has surged to the top of the list of commonly committed crimes, now is the time to identify and measure its cost such that businesses, Government bodies, charities and individuals alike can understand the value of their investment in countering fraud.

In 2016, the UK Fraud Costs Measurement Committee published its first AFI. The 2016 AFI built on work undertaken by the National Fraud Authority (NFA), which had established the concept and experimented with a variety of methodologies. The NFA published four reports, the last of which was in 2013.

The NFA was abolished in 2014 leaving a gap in the measurement of the cost of fraud to the UK: a gap the partners in this project were keen to fill. The partners wanted to build upon the work of the NFA by offering the same detailed estimates of the cost of fraud to the UK, while also using a more developed and consistent methodology to allow dependable comparisons over time.

Research team and methodology

The research team for this year’s AFI was led by Professor Mark Button from the University of Portsmouth’s Centre for Counter Fraud Studies and included David Shepherd and Dean Blackbourn. The methodology used has been developed in line with the groundbreaking work of the NFA.

Professor Mark Button

Professor Mark Button

“The £190 billion cost of fraud represents more than the UK Government spends on health and defence combined or all welfare payments excluding pensions,” explained Professor Mark Button. “In the public sector alone, with fraud losses of £40 billion, this is equivalent to what we pay in national debt interest or spend on defence. This report shows that there are clear differences in the strengths and risks of fraud in the different sectors of the UK economy. The thin resources of the state dedicated to fighting fraud means that, for most organisations and individuals, the best they can do is protect themselves. Investing in the appropriate strategies to increase their resilience to fraud is the most effective way in which to reduce the risk of fraud.”

Nick Mothershaw, director of fraud and identity solutions at Experian, stated: “This year’s report highlights how the continued growth of procurement fraud remains a problem for many businesses. Most often, it’s the employees who are instrumental in procurement fraud. On that basis, vigilance and appropriately vetting staff should be a high priority for all businesses. Making sure you employ the right people and that your existing staff members, and particularly those in positions of responsibility, are not under duress will help you to avoid potentially costly losses.”

Mothershaw went on to explain: “Also interesting is that the report shows pension fraud is growing in the public sector. While there are no published figures for the private sector, it’s understood that fraudsters are targeting the Pensions Release (where pension holders, aged over 55, are allowed to withdraw up to 100% of their pension benefits as a cash lump sum, income or a combination of both). It’s worth noting that, while the volume of fraud is low, the value of fraud losses is high, suggesting fraudsters are focusing their attentions on the biggest value areas.”

Plastic card and online banking fraud

According to Mothershaw, consumers need to be careful of investment opportunities that are potentially too good to be true. Pension companies need to ensure their ID verification tools are both Best in Class and cost-effective to execute as the Pensions Release is predicted to continue to grow.

“In the finance sector,” observed Mothershaw, “plastic card and online banking fraud continues to increase. A new regulation in 2018, in the form of the Payment Services Directive 2, will enforce more robust ID and fraud controls on online payments to address this. Essentially, it will make it much harder for a fraudster to use a victim’s
payment card online unless they also gain control of the individual’s online banking details. The regulation should result in a significant decline in plastic card fraud, yielding an increase in detected and prevented frauds as a result.”

*Download your copy of the AFI report 

About the Author
Brian Sims BA (Hons) Hon FSyI, Editor, Risk UK (Pro-Activ Publications) Beginning his career in professional journalism at The Builder Group in March 1992, Brian was appointed Editor of Security Management Today in November 2000 having spent eight years in engineering journalism across two titles: Building Services Journal and Light & Lighting. In 2005, Brian received the BSIA Chairman’s Award for Promoting The Security Industry and, a year later, the Skills for Security Special Award for an Outstanding Contribution to the Security Business Sector. In 2008, Brian was The Security Institute’s nomination for the Association of Security Consultants’ highly prestigious Imbert Prize and, in 2013, was a nominated finalist for the Institute's George van Schalkwyk Award. An Honorary Fellow of The Security Institute, Brian serves as a Judge for the BSIA’s Security Personnel of the Year Awards and the Securitas Good Customer Award. Between 2008 and 2014, Brian pioneered the use of digital media across the security sector, including webinars and Audio Shows. Brian’s actively involved in 50-plus security groups on LinkedIn and hosts the popular Risk UK Twitter site. Brian is a frequent speaker on the conference circuit. He has organised and chaired conference programmes for both IFSEC International and ASIS International and has been published in the national media. Brian was appointed Editor of Risk UK at Pro-Activ Publications in July 2014 and as Editor of The Paper (Pro-Activ Publications' dedicated business newspaper for security professionals) in September 2015. Brian was appointed Editor of Risk Xtra at Pro-Activ Publications in May 2018.

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