Fraud is costing businesses and individuals in the UK £130 billion each year. The Financial Cost of Fraud Report 2019, developed by national audit, tax, advisory and risk firm Crowe in conjunction with the Centre for Counter Fraud Studies at the University of Portsmouth, also reveals that fraud is costing the global economy a massive £3.89 trillion, with losses rising by 56% in the past decade.
The report, which was first published in 2009, draws on over 20 years’ extensive research, reviewing a total of 690 loss measurement exercises across a range of industries, expenditure, organisations and countries.
Jim Gee, partner and national head of forensic services at Crowe, said: “In the ten years since the first Financial Cost of Fraud document was published, the UK and global economy has suffered rising losses each year owing to a multitude of new and diverse threats. Losses in 2018 averaged 7.15% of expenditure compared to 4.6% in 2007. The figures quoted in the 2019 report are stark. For the UK, fraud losses equate to £130 billion each year, while the global figure represents more than 80% of the UK’s entire GDP.”
Nonetheless, the 28-page report – authored by Gee in tandem with Professor Mark Button – also highlights that, for many businesses, fraud is a problem that can be tackled. It’s estimated that, were organisations to correctly measure, manage and introduce procedures designed to reduce fraud, potential savings of up to £76 billion could be made annually. That’s a sum 57% greater than the UK Government spent on defence solutions in 2018-2019.
Gee added: “Sadly, too many organisations adopt a reactive approach to fraud and only look to tackle it once it has taken place and losses have already occurred. A change of perspective is needed. Fraud is an ever-present, high volume, low value problem and only a small proportion of it is detected. The question is not if it’s taking place, but at what level. We need to view fraud as a business cost. By understanding the nature and scale of the cost, we can reduce its extent, subsequently enhancing the profitability of companies and ensuring better-funded public sector and charitable organisations.”
In a joint conclusion to the document, the authors state: “In any economic climate, not to consider the financial benefits of making relatively painless reductions in losses to fraud and error is foolhardy. Doing so can mean more money for better public services, more profitable companies and charities better able to fulfil their charitable purposes.”
*Read The Financial Cost of Fraud Report in full here