Increased fraud uncovered in UK’s financial sector

BDO LLP and other experts said both developments are in part fuelled by increased regulatory scrutiny of financial services industries. The report, which examines all cases over £50,000, finds that the total amount of cross-industry fraud in the UK fell to £1.05bn in 2013 from £1.37bn in 2012. However, the jump in fraud at financial services firms to £532m also reflects a rise in the number of fraud cases in the sector, up to 132 last year from 122 in 2012.hideAccording to the report, fraud in the financial services industry now accounts for 51% of all reported activity in the UK by value and over 25% of reported cases. BDO LLP believes that this increase in value and number of frauds can, in part, be attributed to increased regulation and compliance driving greater transparency. Kaley Crossthwaite, Partner and Head of Fraud at BDO LLP, said: "At face value, fraud in the financial services sector would appear to be on the march, however we need to give this context. We firmly believe that the ever-increasing regulatory and compliance burden imposed on financial services firms by the FCA and PRA means that fraud which historically may not have been reported, but rather dealt with privately in-house, is now coming out driven by a growing demand for transparency." "Financial services would seem to be taking a lead with increasing regulatory demands for greater transparency in the sector leading to more fraud coming to light in this area," she added. The overall number of cross-industry fraud cases increased to 525 last year, up from 416 in 2012. However, the average value of incidents fell to £2m, down from £3.3m in 2012 and £5.1m in 2011. The spike in reported money laundering to £288m means it is now the largest type of fraud in financial terms, the report says. Ms Crossthwaite said increased transparency in the financial sector is also playing a role in this development. "Reported cases of money laundering have surged in 2013 both in terms of value and number of cases driven largely by criminal greed. This may be partly down to an increase in organised crime activity, however the demand for transparency in the financial services sector is also surely playing a part. The laundering of ill-gotten gains is largely carried out through the financial services sector and the increased legislation and compliance imposed on largely unsuspecting businesses operating in this sector seem to be uncovering increasing numbers of illegal transactions that may have historically been swept under the carpet," she said. Jim Muir, Director of data management experts AutoRek, concurred: "The value of money laundering cases may have quadrupled, but this rise is not necessarily linked to an increase in crime. Instead, the emergence of a global network of collaborating regulators and an increasing confidence in rewarding whistleblowers is likely to have contributed to improvements in money laundering detection." FraudTrack is prepared by BDO LLP and is based on all reported fraud cases over £50,000 between December 1, 2012 and November 30, 2013.

Increased fraud uncovered in UK’s financial sector

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