With the UK losing more than £100 billion each year to fraud, Niall Hearty of financial crime specialists Rahman Ravelli outlines the problem and the possible solution

The annual cost of fraud to UK businesses and individuals is £137 billion.

That is the figure that has been produced following research by audit firm Crowe for the “Financial Cost of Fraud Report’’ it has published with the Centre for Counter Fraud Studies (CCCF) at the University of Portsmouth.

The report states that fraud has a serious and detrimental effect on all sectors in all countries. In the case of the UK, it argues that the impact of fraud could be reduced by up to 40% if organisations took appropriate steps to reduce it.

Jim Gee, Crowe’s Head of Forensic and Counter Fraud Services, said that new and diverse threats have led to the UK and other countries losing increasing amounts to fraud year on year. According to him, the action needed to tackle fraud has not kept pace with the rate at which the problem is increasing. 

Too many organisations, he argues, take a reactive approach and only look to tackle fraud after they realise they have suffered losses. They should be taking a different perspective – they should recognise that fraud will be happening and should try to understand how to reduce its impact, rather than wait until they see evidence of its effect.

A cultural change is certainly required within the board room so that businesses come to view fraud prevention as part of the cost of doing business. A more proactive approach, with tailored compliance procedures, should assist in reducing a company’s exposure to fraud. This is arguably more important now, given both the surge in fraud directly related to COVID-19 and the economic uncertainty created by the pandemic, which is likely to prompt further fraud.