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Fraud costs UK companies £2.1bn in 2009

Fraud cost UK companies nearly £2.1bn last year, according to research from BDO Stoy Hayward.

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.”

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  1. This is the tip of the iceberg and they haven’t even seen that coming over the horizon yet.

    As far as the banks are concerned it was more often they who were guilty of overvaluing the assets in order to build a ‘book’ and collect a ‘bonus’. How? Will anybody ask me for more on this? The FSA? BDO?

    No, because they know better.

    But what of the ‘consumers’ who signed the applications in the full knowledge that they were not based upon fact? Have any of them been charged with fraud?

    We need regulatory balance, I see none.

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