Large-scale fraud falls, but jumps in public sector

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The Independent Online

A decline in large-scale fraud being committed in the UK should not prompt complacency, a leading accountant has warned, with some types of organisation having much greater success dealing with fraud than others.

The total value of large frauds – involving £50,000 or more – committed during the six months to the end of May was £920m, down from £1.06bn last year, according to BDO, which conducts a regular FraudTrack survey. The average value of each fraud was £4.5m, compared with £6m a year ago, BDO added, the sharpest fall for four years.

However, the research also reveals that there were 205 reported cases of large-scale fraud in the first half of the year, significantly above last year's total. Moreover, while the private sector appears to be cracking down on fraud, the public sector still does not.

In fact, fraud in the public sector was worth £431m in the first half, almost double last year's total of £274m, which means this part of the economy now accounts for 46 per cent of all fraud, more than ever before.

The figures will add to the controversy about different working practices in the public and private sector, but Simon Bevan, BDO's head of fraud services, said the report might be misleading – possibly because private sector organisations, particularly in financial services, have become more reluctant to report fraud to the police.

Fraud professionals say the crime is generally more prevalent during difficult economic times – but also point out that organisations are increasingly alert to the damage a large fraud case could do to their reputation.

"As the old adage goes, 90 per cent of fraud goes unreported, so this isn't particularly surprising," said Mr Bevan. The public sector was probably less reluctant to go to the authorities.

"The fact is that many people who fear that reporting fraud will lead to bad publicity also question whether reporting fraud to the police or the Serious Fraud Office is the most effective method of dealing with it. We believe this is a key reason why reported fraud figures are down."

"What's likely is that more and more organisations in the financial services sector are finding a different method for tackling fraud. They will most likely be taking the view that the civil approach means they are more likely to recoup lost money and less likely to risk reputational damage," he said.