Research from the accountancy firm shows losses from frauds reported by UK companies increased by 76 per cent last year, representing the highest total since BDO began keeping records in 2003.
Management fraud, in which senior executives issue misleading financial statements, increased by 48 per cent last year, accounting for £503m of total losses, or 24 per cent.
Mortgage fraud accounted for 18 per cent, or £375m, tax fraud 15 per cent and money laundering 3 per cent.
Frauds involving the misuse of assets, typically other people’s investments, property and savings, has increased 325 per cent from £58m to £250m. Fraud in the retail sector increased by 730 per cent to £123m
BDO says today’s report is “a precursor of things to come”, and is warning that annual reported corporate fraud could be as high as £5bn in a couple of years as more fraud is discovered.
BDO head of fraud Simon Bevan is now predicting that reported fraud will treble over the next two years.
He says: “2009 saw the steepest increase since our report began seven years ago, with the average value of each fraud now over £5m compared to £1.8million in 2003.
“Based on my experience of the two previous recessions, I expect that reported fraud will treble over the next two years. There has always been a lag effect, with reported fraud continuing to rise for at least a couple of years after businesses start to come out of the recession.
“A large part of this will be a tidal wave of fraudulent borrowing that has only just started to appear, particularly through use of over-valued properties as security for loans, while the property market was booming. Currently many of these frauds are yet to be recognised by the banks, which still have them classified as non-performing loans.
“It is only when specialist recovery departments start thorough investigations and eventually litigating against alleged dishonest borrowers and their complicit advisors that the true nature of these potentially horrendous fraud losses will come to light. It will take many years for the excesses of the past years to work through the system.”