There has been a cascade of negative headlines in recent months about increased incidences of fraud in the UK. Stretched police resources, combined with an array of opportunities for online exploitation of businesses and consumers, are perceived to have made it a good time to be a fraudster.
Beyond the wider implications for UK plc, more instances of fraud increases the risk of professional negligence claims against auditors, in particular, but also other professionals that might have been caught up with a deception and arguably ought to have prevented it. With limited central funds available to victims of fraud - a claim against a professional indemnity policy is often the best bet for a party who has lost money. Certainly, by way of example, we have seen an increase in claims against financial advisers who have been duped into selling investments on a client's behalf, and pay the proceeds away to a third party fraudster.
BDO has confirmed this worrying trend, with the release of its annual FraudTrack. FraudTrack assesses UK reported fraud cases with a value of over £50,000. The survey is in its 14th year.
This year's findings include a 32% increase in the total value of reported fraud of (up to £2bn - a five-year high), and an increase in the average value of reported fraud of 35% (up to £3.9m).
Even then, BDO has urged caution in considering their findings, stating:
"Remember that reported fraud is only the tip of the iceberg. Many frauds continue to go on undetected by businesses whose systems and controls are not effective in identifying and preventing fraud. Many companies also choose to investigate cases of fraud behind closed doors to avoid inevitable damage to their reputation".
Perhaps the only slight consolation to RPC's client base will be the fact that the report found that Finance & Insurance fraud had fallen by 62% - from £567m in 2015 to £215m in 2016.
A high profile example is the recent BT accounting scandal which saw an expected write down of nearly £150m owing to "inappropriate management" of BT's Italian business turn into a loss of closer to £530m following a forensic investigation. An investigation by KPMG has identified wider reaching problems with the accounting practices than had been anticipated, which has had such a significant impact on BT's share value that it has prompted its shareholders to take legal advice about a potential group action.