Coming soon: FraudTrack
Reported fraud in the UK exploded in 2009 and broke the £2 billion barrier for the first time. The amount lost by businesses and the public sector to larger frauds increased last year by 76 per cent, with both the number and size of frauds increasing dramatically.
While this is bad for the economy in general, there is nevertheless always work for lawyers once a fraud is out in the open.
However, detection isn't straightforward. FraudTrack estimates that over 90 per cent of large frauds never get reported to the authorities.
Of course much of this takes place in the financial sector. The disastrous conditions in this area have led to a massive 70 per cent increase on last year’s figures, taking total fraud to £1.34 billion.
Simon Bevan, Head of Fraud at BDO, says: “2009 saw the steepest increase since our report began seven years ago, with the average value of each fraud now over £5 million – compared to £1.8 million in 2003.
“Based on my experience of the two previous recessions, I expect that reported fraud will treble over the next two years. There has always been a lag effect, with reported fraud continuing to rise for at least a couple of years after businesses start to come out of the recession.”
For legal teams the priority is to ensure they are well positioned to offer their services in clearing up the problems caused by what could soon become £6 billion of fraudulent activity in the UK.
BDO advise that lawyers should use their ‘Top Ten Questions’ checklist to present a proactive stance to potential clients to uncover the signs of fraud – and drum up new business. The statistics from the BDO FraudTrack report can only strengthen the case for clients taking this issue very seriously indeed. FraudTrack will soon be available in full.
Top Ten Questions
1. Why is the company spending so much on marketing?
2. Why is their gross margin decreasing?
3. Why is the property they took as security worth only 50% of what we thought?
4. Why is their bonus structure linked to revenue not profit?
5. Why are they making so much profit – are we being hoodwinked by management at a remote location?
6. Why didn’t they see this sooner?
7. Why didn’t they check the Financial Director’s CV in more detail?
8. Why didn’t they have better controls?
9. Why did they put so much trust in someone who I knew nothing about?
10. Why do some of their potential suppliers not reply to their requests for tender?
