The latest from the Consultancy.org website makes for grim reading within the insurance sector. Fraud is still increasing, and cyber attacks are growing in severity and sophistication. After major cases of fraud declined drastically in 2018, news has broken that the value of fraud worth over £100,000 has surpassed the £1 billion mark once more. A new UK survey has revealed that booms in ‘old school’ scams and advanced cyber-attacks have driven the explosion in fraud value.
Britain saw an exponential boom in fraudulent activities between over the 15 years following 2003. The value of fraud rose by billions, with financial services accounting for the largest chunk of the glut, boasting a bill of just under £900 million in 2017. It was also the second year in a row that the UK had seen the value of fraud across the nation breach the £2 billion mark, having spiked sharply over 2016.
The year of 2018 appeared to finally have seen the UK stop the rot. The BDO annual Fraud Track report in January 2019 found that the total value of fraud in the UK more than halved in 2018, following a record 15-year high the year previous. Fraud value declined by 64.7% in 2018, falling from £2.1 billion to £746.3 million. While the value and number of fraud cases has not rebounded by anything like as much in the year since, however, a new report has made it plain that the situation is far from being resolved.
According to KPMG’s latest Fraud Barometer, the value of UK fraud has once again accelerated past the £1 billion barrier. While there is some variation between KPMG and BDO’s methodology – with KPMG ruling out fraud cases of less than £100,000 which reach UK Courts – data from both firms found there had been a drastic decline last year. The findings of KPMG this year should therefore be of grave concern to those who thought definitive progress was being made on the matter.
Worryingly, KPMG found that despite the number of fraud cases in the UK reaching UK Courts fell from 453 cases in 2018 to 369 cases this year, sophisticated cyber-crime combined with traditional old school frauds pushed the value of alleged fraud cases drastically upward. The Fraud Barometer reported that in response to a leaner 2018, fraudsters spent most of last year going ‘back to basics’, targeting commercial businesses, something which helped drive the total value of fraud up to £1.1 billion in 2019, the 6th largest value recorded in the report’s 33 year history.
Alleged fraud cases against the public were also up from £40 million in 2018 to £63.8 million – although the number of cases fell from 79 in 2018 to 67 in 2019. One case KPMG pointed to involved a rogue plumbing gang running two companies which earned more than £11 million. Trading Standards identified more than 850 customer complaints after they charged customers many times over the standard hourly rate plus VAT to carry out work.
The huge boost in the value of fraud in the UK seems to have been largely driven by cases in Scotland and the Midlands. The latter in particular saw a boom in value of well over 1000%, while the volume of cases stagnated. Scotland saw value spike by more than 200% while its volume declined. The South East was the only other region to see an increase of any kind.
Comparatively, every other region saw a fall in both value and volume of fraud cases worth over £100,000 which reached courtrooms. The South West saw the highest decline in value, while the North East saw the country’s largest decline in the volume of fraud cases.
Mark Thompson, UK Investigations Director at KPMG, formerly the Chief Operating Officer of the Serious Fraud Office, commented, “The significance of the threat to the UK’s prosperity and the impact on victims were acknowledged by the Government in its Economic Crime Plan in July. This wide ranging plan contains a large number of welcome commitments but they will need to be delivered on by the next government if there is to be any discernible impact on the level of fraud in the long term.”