More than £6,000 lost per second every day of the year. Equivalent to more than £3,900 per adult in the UK.
The annual cost of fraud in the UK could be as high as £193bn per year according to a new report issued today. This dwarfs previous estimates produced by the UK Government which put the figure at around £50bn in 2013.
The Annual Fraud Indicator 2016 has been overseen by the UK Fraud Costs Measurement Committee (UKFCMC), supported by Experian and PKF Littlejohn and is based on research by University of Portsmouth’s Centre for Counter Fraud Studies, Europe’s premier research centre concerning fraud.
The UKFCMC has revised and renewed research undertaken by the Government up to 2013. It reveals the staggering true cost of fraud – an average of more than £3,900 per adult in the UK with losses taking place at a rate of £6,000 per second.
The private sector has been under the biggest attack from fraudsters, with both SMEs and large enterprises losing an estimated total of £144bn a year. By far the biggest source of fraud for these businesses relates to procurement – an enormous £127bn. Procurement fraud includes crimes such as the submission of false invoices or the awarding of contracts in exchange for bribes. The report highlights that procurement is so vulnerable because of the sheer size of expenditure which it accounts for, as well as the high volume, low value nature of transactions and the breadth of fraudulent activity it is susceptible to.
In addition to procurement fraud, the biggest types of fraud impacting UK businesses identified by the Annual Fraud Indicator include:
- Payroll fraud, which accounts for losses of £12bn per year – 8 per cent of the total cost of fraud to the private sector
- The charity or ‘third sector’ is hit with fraud costs of £2bn per year
- Mortgage lending, which suffers losses equivalent to £1.3bn annually and in which 84 applications out of every 10,000 are suspected to be fraudulent
- Insurance sector fraud, costing £1.3bn a year through illegitimate claims with an estimated 350 frauds every day
Fraud in the public sector of around £37.8bn is equivalent to 5.5 per cent of the £694bn spent annually. Central government bears the majority of this cost at around £30bn per year. Procurement fraud is again a major source of losses, costing central and local Government a combined £10.5bn per year. Other key areas that are hitting Government purse strings include:
- Tax fraud costing £15.4 billion every year, equal to 3% of the total tax revenue;
- Fraud losses in the NHS relating to income and expenditure amounting to £2.5 billion;
- Housing tenancy fraud, which is estimated to cost £1.7 billion;
- Benefit and tax credit fraud, which are estimated at £2.4 billion;
- Grant fraud, which is estimated to cost £2.7 billion.
Professor Mark Button, Director of the Centre for Counter Fraud Studies, University of Portsmouth commented: “The level of losses suffered by the public sector and central Government as a result of fraudulent activity are immense. Government suffers in a similar way to the private sector from vulnerabilities in procurement but also telling is the more than £15bn lost annually to tax fraud largely from people and organisations not declaring and under-declaring income.”
The cost of fraud carried out directly against individuals is now £9.7bn per year with identity fraud being the single largest contributor at almost £5.4bn. It is estimated that there are up to 3.25 million victims. Given the rise in identity theft and the prevalence of cyber-crime, this is only expected to grow.
The Annual Fraud Indicator, thanks to the partnership between Experian, PKF Littlejohn and the University of Portsmouth’s Centre for Counter Fraud Studies, aims to help consistently gauge, analyse and quantify the true scale of fraud in the UK. For the full report findings please visit: http://www.experian.co.uk/assets/identity-and-fraud/pkfexperian-fraud-indicator-report.pdf
About the Annual Fraud Indicator 2016
The Annual Fraud Indicator uses methodology developed in line with the ground breaking work of the National Fraud Authority. The estimates are intended to lay down a benchmark by which year-on-year sector-specific fraud analysis can now be made. The work is overseen by the UK Fraud Costs Management Committee, a group of cross-sector fraud experts who meet regularly to analyse fraud data, supported by a partnership between Experian, PKF Littlejohn and the University of Portsmouth’s Centre
Source: Experian Press Release