Fighting Financial Fraud in the UK
Financial fraud is a plague which has swept throughout the nation for quite some time, and is growing increasingly worse as criminal masterminds become more creative and tech savvy. According to recent statistics, a financial scam will occur every 15 seconds in the UK, leaving victims wondering who pulled the rug out from under them. We take a closer look at the impact of financial fraud on the UK’s economy, and discuss possible solutions to minimise the epidemic.
To what extent is the UK vulnerable to fraud?
According to a recent report by The Annual Fraud Indicator 2016 - supported by the UK Fraud Costs Measurement Committee (UKFCMC) - fraud could be costing the UK a devastating £193 billion per year. The figures showed that more than £6000 is lost per second every day of the year, equivalent to more than £3900 per adult in the UK. The private sector has been particularly vulnerable to fraud, with both SMEs and large businesses losing an estimated total of £144 billion a year.
Payroll fraud accounts for losses of £12 billion per year, 8 percent of the total cost of fraud to the private sector. The charity or third sector is hit with fraud costs of £2 billion per year, while mortgage lending suffers losses equivalent to £1.3 billion annually, in which 84 applications out of every 10,000 are suspected to be fraudulent. Insurance sector fraud, costs £1.3 billion a year through illegitimate claims, with an estimated 350 frauds each day.
Fraud in the public sector of around £37.8 billion is equivalent to just 5.5 percent of the £694 billion spent annually. Central government bears the majority of this cost at around £30 billion per year. Procurement fraud is again a major source of losses, costing central and local government a combined £10.5 billion per year.
And if you thought that was bad, there was a staggering total of 1,007,094 cases of card, cheque, phone or online fraud within the space of just six months (from January to June) this year, equating to an incident of fraud occurring every 15 seconds, according to Financial Fraud Action UK.
Financial experts weigh in
"The impact of financial fraud can be devastating on victims, with fraudsters using increasingly cunning and convincing tactics. They prey on people who are trying to get on with their lives but in a moment where they are busy or distracted become vulnerable,” cautions Ben Wallace, Home Office Security Minister.
What’s worse is that some experts believe that Brexit has created a perfect climate for fraud. Hitesh N Patel, UK forensic partner at KPMG, said companies were coming under threat as they looked to form new business partnerships following a slowdown in the UK economy. "While economic conditions remain soft, it is unsurprising that commercial enterprises and investors are looking for new ways of making money, often dealing with people they have not encountered before,” he says. Although working towards forming strategic partnerships can be successful in broadening business prospects, it can also open up channels for fraudsters to exploit prominent organisations. “For commercial businesses, two of the biggest frauds recorded this year progressed so far because the fraudsters were able to create a reputational illusion, convincing victim companies to hand over large amounts of money – often sums that materially impacted their ability to operate,” Hitesh adds. For this reason, organisations need to be extra vigilant when encountering proposals from unknown companies. “As the environment for business continues to be tight and competitive, fraudsters are able to hide easily among genuine businesses," cautions Hitesh.
What can be done to stop fraud in the UK
A campaign called ‘Take Five’ has been launched by FFA UK, encouraging individuals and businesses to pause before jumping into any financial transactions with unknown proposers. The drive focuses on making customers aware of potential email, phone and text-based scams.
Katy Worobec, Director of FFA UK, told the Press Association that the campaign aims to encourage individuals to reclaim control of conversations and not feel that they've got to listen politely while someone cons them out of their money. “In some cases fraudsters pose on the phone as police officers and pretend the victim's account is at risk, telling them they need to urgently transfer their money into a “safe account” that really belongs to the criminal. Con artists will also send texts and emails pretending to be from their victim's bank. Sometimes fraudsters even send couriers to a victim's home to collect bank cards,” she cautions.
Founders of the campaign are hopeful that customers and business owners will be empowered to turn down suspicious proposals, and thus minimise the rate of financial scams occurring nationwide.
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