The UK is being hit by a staggering £130bn fraud bill each year, with many businesses failing to tackle their exposure head-on, a report has warned.
The Financial Cost of Fraud report from risk firm Crowe and the Centre for Counter Fraud Studies at Portsmouth University, showed fraud was costing the global economy £3.89trn – up 56 per cent in the past decade.
The report reviewed 49 organisations from a range of countries including the UK, Ireland, USA, Canada, the Netherlands, France and New Zealand between 1997 and 2018.
In the UK, total losses were about £130bn each year, with the report warning that while fraud awareness among businesses leaders had improved over the past two decades, their approaches to the problem had not, with many still adopting a reactive approach.
Crowe said it was time for businesses to view fraud as a business cost.
It added were UK organisations to correctly manage procedures to reduce fraud, up to £76bn of annual savings could be made.
The report also found fraudsters continued to exploit new technology to undermine and target businesses and individuals for personal and sometimes political gain.
The average losses due to fraud, shown as a percentage loss of expenditure, stood at 6.05 per cent. Since the start of the global recession in 2008, average losses have risen from 4.57 per cent to 7.15 per cent in 2017/2018 – an increase of 56.5 per cent.
Overall, an average organisation should expect fraud losses to account for between 3 per cent to 6 per cent, although in some cases it is as high as 10 per cent, Crowe warned.
Jim Gee, partner and national head of forensic services at Crowe, said: "In the ten years since the first Financial Cost of Fraud report was published, the UK and global economy has suffered rising losses each year, owing to a multitude of new and diverse threats. The figures quoted in the 2019 report are stark.
"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. The question is not if it is 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, enhancing the profitability of companies and ensuring better funded public sector and charitable organisations."
Peter Magliocco, chartered financial planner at Wingate Financial Planning, said the company had experienced fraud attempts in the past, adding advisers should remain vigilant to protect clients.
He said: "It’s not unheard of for client email accounts to get hacked. Thankfully, we’ve managed to intercept these attempts where we’ve had fraudulent requests from clients to disinvest from funds.
"We’ll always call the client and ask if they have sent this email as well as be as careful as possible to protect client data."
Source: The Financial Times