Fraud is costing financial services £4bn a year

28 January 2010 | By Helen Pow

Fraud costs the UK financial services industry £3.8bn a year, according to estimates from The National Fraud Authority.

The overall cost of fraud to the country is over £30bn a year.

The data, which the NFA claims is far more comprehensive than the last widely accepted figure of £13bn in 2007, shows that £15.2bn is lost through tax fraud while the Department for Work and Pensions loses £1.1bn through benefit fraud.

The NFA says the report and overall loss estimate will ena-ble it and the Government to better prevent, detect and deter fraudsters and identify areas of fraud that cause the most harm to the economy to tackle it more effectively.

The NFA used information from a cross-section of public and private sector agencies and found that the public sector accounts for 58 per cent of the total figure while the private sector accounts for 31 per cent and fraud against individuals 12 per cent.

But it says that data collection is more sophisticated in the public sector.

In the private sector, the NFA says that the financial services industry was hit by the highest loss to fraudsters, with insurance and mortgage fraud costing £2bn and £1bn respectively. The remainder was mainly comprised of fraud concerning plastic cards, online banking and cheques.

Chief executive Dr Bern- ard Herdan says: “Although the figure appears far greater than the previous estimate, this is because we have included many additional fig- ures which other studies have not included.

“With this vital information, we can develop clearer priorities to prevent, detect and deter fraudsters. We will use the data to help identify those areas of fraud that cause the most harm to the econ-omy. Reducing the cost of fraud is important but, even more significantly, I want to stop more people from bec-oming victims. I have seen at first hand the devastating effects that fraud can have. It destroys lives and livelihoods.”

PCB Litigation partner Anth- ony Riem says: “In any recession, there is a greater fin-ancial pressure both to commit and detect fraud. The figures highlight the need for the Government, business and individuals to ensure that effective steps are taken to prevent fraud but they also dem-onstrate the need to recover monies that have been stolen.”