Businesses fighting more fraud than ever

UK businesses are now fighting more fraud than ever before, according to new research from KPMG.

January to June 2011 saw UK fraud reach £1.1bn, from £609m during the same period of 2010. The research found that whilst the greatest burden of fraud, by value and number of cases, has been borne by Government agencies, the private sector is also under intense attack.

The analysis found that the average case value of private sector fraud has jumped from £2.5m in January – June 2010, to £4.2m for the same period this year.

Hitesh Patel, UK forensic partner at KPMG, commented: “The evolution of e-commerce, as well as increased reliance on automated payment systems and the ability of professional criminals to stay one step ahead, has swollen overall UK fraud figures.

“But, fraud levelled at UK businesses tears at the very fabric of the economy. Although it is just as prevalent in larger organisations, the small and medium sized companies are more likely to suffer dire consequences as a result. For SMEs fraud can often lead to significant cash flow problems resulting in redundancies - and at worst a fight for survival.”

The majority of fraud is committed by professional criminals, the research found, with fraud perpetrated by criminal gangs rising 107% in the first half of 2011.

Internal fraud committed by employees also did £225m worth of damage this year (up from £181m Jan – Jun 2010), with management fraud averaging at £7.3m a case, and employee fraud around £708,000.

Patel said: “The culture and tone at the top are critical to stamping out internal fraud. In order to guard against professional criminals, and those operating outside the business, companies must fully assess where in their operations they are vulnerable.

They should arm themselves with a set of controls that enable greater detection, such as whistle blowing lines and fraud risk reviews, while thoroughly mining the wealth of data that sits within an organisation and if analysed would identify fraudulent activity.

“This huge increase in the level of fraud hitting the private sector demonstrates the importance of ensuring that companies have mechanisms to prevent fraud and detect misconduct effectively.”