Preventive measures can reduce fraud by up to 40 per cent

british-twenty-pound-notesA new report claims that fraud is costing the UK £85.3 billion every year but pre-emptive counter-fraud action is capable of achieving savings of up to £34 billion.

The ‘Financial Cost of Fraud Report 2013’ from accountancy and business advisory firm BDO LLP is based on data collated over 15 years and relates to the total cost of fraud, not just fraud that has been detected or reported.

It claims average losses, based on total expenditure, stood at 4.57 per cent between 1997 and 2007, but since 2008 the figure has increased by almost 20 per cent to 5.47 per cent.

This implies a total loss due to fraud of £85.3 billion in the UK and £2.91 trillion on a global scale.

According to the report, developments of improved counter-fraud measures can reduce losses by up to 40 per cent within 12 months. In the UK, this would represent around £34 billion – the equivalent of the UK Government’s education budget in 2012.

Examples of such proven success from counter-fraud measures include the NHS – where losses were reduced by up to 40 per cent within 12 months and 60 per cent over a longer period.

The report also cited success stories from the UK Department of Work and Pensions (a 24 per cent reduction) the US Department for Veteran Affairs (46 per cent) and the US Department of Agriculture (22 per cent)

Jim Gee, a counter-fraud expert and director of counter-fraud services at BDO, said: “Fraud remains a challenging and expensive problem, and its economic effects are clear – affected public services, less financially stable and profitable companies, reduced job security and lower disposable incomes for us all.

“The financial crisis, where fraud has risen significantly, has clearly provided the ideal conditions in which fraud can grow.

“Assessing the true cost of fraud, as opposed to the cost of reported fraud, presents some very scary numbers. Putting in place pre-emptive measures could make very significant improvements to the financial health and stability of UK plc.”

The recent annual Crime Survey for England and Wales from the Office for National Statistics showed a 27 per cent increase in fraud in the year ending March 2013 compared with the previous year and an increase of 58 per cent compared with 2007/08.

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