Professional Documents
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FEBRUARY 2017
REPORT
CONTENTS
EXECUTIVE SUMMARY 01
STAY ONE STEP AHEAD 02
SOCIAL ENGINEERING 03
TYPE OF FRAUD IN 2016 04
INDUSTRY SECTOR FOCUS 05
MOTIVE FOR FRAUD IN 2016 08
FRAUD BY LOCATION 09
OUR SERVICES 10
FEBRUARY 2017 | BDO FRAUDTRACK REPORT 01
EXECUTIVE SUMMARY
VOLUME OFCASES
REPORTED FRAUD
FALLS BY 3%
62% FROM £567M IN 2015
VALUE OF REPORTED FRAUD
IN FINANCE & INSURANCE
FALLS BY TO £215M IN 2016
220% 69%
TOTAL VALUE AND IT
OF TAX FRAUD MAKES UP
INCREASES BY OF ALL FRAUD BY VALUE IN 2016
Time and again when investigating Fraudsters are cunning and make it their It is also crucial that sufficient training
fraud cases, both large and small, business to trick and manipulate in order is provided to ensure that employees
to commit their fraud. It is therefore vital not only understand how and why the
we see that a lack of effective that you stay one step ahead in order to controls operate, but that they also
internal controls has allowed fraud stop them in their tracks. understand what action to take if they
to be perpetrated. In many cases suspect fraud has taken place.
In order to prevent and detect fraud it is
we see that internal systems and essential to be proactive. Implementing As technology becomes more
controls have been put in place robust systems and controls is key, sophisticated and increasing amounts of
but that they were simply not fit but it is equally important that their our professional and personal information
for purpose in preventing fraud. effectiveness is frequently tested, and are more accessible online, businesses and
updates made where required. Taking this individuals now face an unprecedented
approach provides peace of mind that risk of fraud through cybercrime and
your fraud defences are up to date and social engineering.
your business is protected.
FEBRUARY 2017 | BDO FRAUDTRACK REPORT 03
SOCIAL
ENGINEERING
04 BDO FRAUDTRACK REPORT | FEBRUARY 2017
The types of fraud with the highest reported value in 2016 were tax fraud, third party fraud
(fraud committed by customers or suppliers) and money laundering.
There was a sharp increase of 220% in the value of reported tax fraud in 2016, which was
due in large part to a carousel fraud valued as £1bn. There was however a significant drop
in the value of money laundering which saw a year on year decrease of 51%, with third
party fraud seeing a decrease of 38%.
NON-CORPORATE
MORTGAGE FRAUD
EMPLOYEE FRAUD
MONEY LAUNDERING
TAX FRAUD
Industry sectors with the highest levels of reported fraud by value in 2016 were Public
Administration, Finance & Insurance and Non-Corporate (fraud against individuals).
OTHER
NON-CORPORATE (INDIVIDUALS)
PUBLIC ADMINISTRATION
The value of reported fraud in the public administration sector saw an increase of
205% in 2016, rising from £451m in 2015 to £1.4bn in 2016. The number of public
administration fraud cases reported in 2016 also showed an increase, rising from 114
cases in 2015 to 150 in 2016 – a 32% increase.
OTHER
THIRD PARTY FRAUD TAX FRAUD
OTHER EMPLOYEE FRAUD
MONEY LAUNDERING
Reported tax fraud in public administration showed a 220% increase in value in 2016
compared to the previous year. This was largely due to a huge carousel fraud case valued
at £1bn. The number of tax fraud cases also showed a 41% increase, rising from 95 in
2015 to 134 in 2016. However, if the large case of £1bn is stripped out, the average value
of each tax fraud case in 2016 actually fell by 39% from £4.5m in 2015 to £2.7m in 2016.
Aside from tax fraud, money laundering was the second most common type of reported
fraud within the public administration sector in 2016. Although still high at £4.4m,
money laundering within the sector actually showed a 78% decline in 2016 from £20.1m
in 2015.
MONEY LAUNDERING
0 5 10 15 20 25
£ Millions
06 BDO FRAUDTRACK REPORT | FEBRUARY 2017
Despite suffering the second highest amount of reported fraud in 2016, the finance
and insurance sector saw a 62% decrease in the value of cases since the previous year.
Reported fraud in the sector fell from £567m in 2015 to £215m in 2016. Finance and
insurance also saw a 17% drop in the number of reported fraud cases, with the average
value of fraud also falling by 54% from £8.1m in 2015 to £3.7m in 2016.
The highest number of reported fraud cases within the finance and insurance sector in
2016 was in money laundering, which accounted for 34% of all cases in this sector. At
£98.9m, money laundering also accounted for 46% of fraud in finance and insurance by
value in 2016. This, however, shows a marked decrease of 51% from the previous year
when money laundering in finance and insurance was reported as £202m.
Mortgage fraud and third party fraud have also declined in value by 64% and 77%,
respectively.
MONEY LAUNDERING
OTHER
PROCUREMENT FRAUD
PROCUREMENT FRAUD
MORTGAGE FRAUD
MONEY LAUNDERING
In 2016, individuals (rather than corporate The most common type of reported fraud committed against individuals in 2016 was
entities) were again the most common non-corporate fraud, i.e. another individual defrauding another individual, with 83 cases
target for fraudsters. Frauds committed reported. However, this type of fraud only accounted for 12% of the total value of fraud
against individuals accounted for 31% of against individuals. The largest type of reported fraud committed against individuals by
all reported fraud cases in 2016. However, value was third party fraud i.e. individuals defrauded in their capacity as a customer (e.g.
the value of reported fraud against a tradesman or a solicitor stealing from a client), accounting for 86% of the value of
individuals showed a decline in 2016, reported fraud against individuals in 2016.
falling 38% to £172.3m – the first decline
since 2012. This means the average value Despite fraud against individuals continuing to be the most common type of fraud,
of frauds against individuals fell from this year’s results show an overall downward trend in the average value of frauds
£1.8m in 2015 to £1.1m in 2016 – a decline suffered. This indicates that individuals, although continuing to be a target of fraud, are
of 38%. potentially showing an increased awareness of scams and are being defrauded out of
lower amounts of money.
NON-CORPORATE (INDIVIDUALS)
OTHER
COUNTERFEITING
MONEY LAUNDERING
MONEY LAUNDERING
COUNTERFEITING
NON-CORPORATE (INDIVIDUALS)
A fraudster’s motivations vary widely from case to case. The greed of a fraudster should
never be underestimated. This year’s results show once more that greed was the most
common motivation for fraud. Often the fraudster simply thinks that they are entitled to
whatever they stand to gain from their illicit conduct.
Sadly, our results show that it is often the case that the fraudster commits fraud in order
to satisfy a genuine financial need or to help them finance an addiction.
Whatever a fraudster’s initial motivations, it can often become difficult for them to stop
their fraud once they have started. Fraud schemes can become increasingly complex over
time to the point where the fraudster feels that it is impossible to stop without being
discovered. Other fraudsters can become financially dependent on the proceeds of their
fraud and therefore must continue in order to fund the lifestyle they, and often their
families, have become accustomed to.
In order to stop frauds from spiralling out of control, it is vital for all organisations to put
in place strong systems and controls to identify fraud at the earliest opportunity and
regularly test and review them. Frauds can cover long periods so these regular reviews
and checks are also essential.
TERRORISM
NEED/UNFORSEEN
CIRCUMSTANCES
OTHER
DRUGS/ALCOHOL GREED/LAVISH
LIFESTYLE
DEBT
GAMBLING
FEBRUARY 2017 | BDO FRAUDTRACK REPORT 09
FRAUD BY LOCATION
SCOTLAND
36 28
2016 2015
NORTHERN 14 19
11 19 IRELAND
NORTH NORTH
2016 2015
EAST
73 63
2016 2015 WEST
2016 2015
47 39
2016 2015
YORKSHIRE
53 50 24 44
2016 2015 EAST 2016 2015
MIDLANDS
27 26 WEST EAST
2016 2015
WALES
MIDLANDS ANGLIA
20 7
2016 2015
159 175
38 47 WEST COUNTRY LONDON &
SOUTH EAST
2016 2015
2016 2015
2 2
NATIONAL 2016 2015
10 BDO FRAUDTRACK REPORT | FEBRUARY 2017
OUR SERVICES
FORENSIC ACCOUNTING
OUR SERVICES
FORENSIC TECHNOLOGY
GAVIN WILLIAMSON
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