The value of reported UK fraud increased to £2.3billion in 2023, more than double the £1.1billion recorded in 2022 and the second-largest annual fraud value recorded by BDO, the international network of public accounting, tax, consulting and business advisory firms, in 20 years.
While these stats display a worrying trend, the true level of fraud is likely to be higher still, BDO warned as it released the information. This comes as many organisations choose not to report all of the fraud they experience for various reasons.
In fact, the latest Crime Survey for England and Wales revealed that fewer than one in seven fraud offences are reported to the police.
“Many people choose not to report fraud because of shame or embarrassment. Businesses are also reticent about coming forward because of fears around negative publicity, reputational damage, and a lack of faith that the authorities will take action,” explained Kaley Crossthwaite, BDO a forensic partner at BDO.
While the number of high-value cases (over £50million) in BDO’s FraudTrack report increased by 60 per cent in 2023, the total number of reported cases also rose, up by 18 per cent to a three-year high.
Tackling rising fraud levels
The factors behind the rise include the large increase in online scams, phishing and system breaches, and huge spikes in Authorised Push Payment (APP) transactions when fraudsters trick the unwary into transferring money to them.
BDO also saw a rise in the number of online fraud factories or cyber fraud centres, as hundreds of thousands of individuals were trafficked to work for crime syndicates. The UN also estimated that these fraud factories are generating billions of dollars in revenue.
Crossthwaite added: “While we hope the introduction of the Government’s Online Fraud Charter will encourage the technology sector to narrow the opportunities for online fraud, the sad reality is that the fraudsters will be looking to stay one step ahead by exploiting new options like AI.
“All businesses are at risk, and many need to take urgent action to bolster their defences against fraud and financial crime. The ‘failure to prevent fraud’ offence introduced by the Economic Crime and Corporate Transparency Act 2023 may just provide the extra incentive to do so.”
Fraud is growing ‘increasingly innovative’
Ted Datta, head of industry practice, financial crime compliance and third-party risk management, EMEA and Americas, at Moody’s Analytics, offered his view on the findings: “BDO’s research highlights a worrying uptake in the monetary value of fraudulent activity, as well as its increasing variety.
“Surprisingly, money laundering only accounts for five per cent of fraud in the UK in 2023, with corruption making 26 per cent and third-party fraud making up 20 per cent. Tax fraud makes up an alarming 23 per cent, representing a huge challenge for policymakers.
“Fraud has grown increasingly innovative since the pandemic, as bad actors seek new ways to circumnavigate advanced compliance capabilities. Moody’s Analytics’ own Grid data found that global cybercrime events have become much more prevalent over the past four years, with an increase of over 175 per cent.
“As these financial scams proliferate, public trust in the financial system and the new technologies that enable it may deteriorate. Businesses that can confidently vet partners and customers will be the ones who can protect themselves and consumers as fraud continues to rise. The solution is to automate continuous risk monitoring across compliance processes like fraud detection and prevention. Using advanced analytics and AI, compliance teams can spot suspicious patterns and activities in real-time around transaction flows.”
