Fraud – the South West’s new growth industry

July 22, 2011

A six-fold increase in South West company fraud has been reported by Fraudtrack, a survey carried out by accountants and business advisers BDO LLP.

The new data, covering the six months from December 2010 to the end of May this year, show that the value of reported fraud has rocketed year-on-year from £1.729m to £10.889m.
That lifts the South West from the lowest to third-lowest position in the UK. London and the South East remain the highest.
This regional rise also bucks the national trend which shows an overall decrease in the value of reported fraud from £106bn this time last year to £920m this year.  However, BDO says this is an indication of changes to the way fraud is reported rather than a real decrease since many more companies are now choosing to deal with the issue via civil rather than criminal means. There is also a growing reluctance to report fraud to the authorities, particularly in the finance and insurance sectors.
Mike Mason, forensic accounting director at BDO’s Bristol office, explained: “Many of the businesses we deal with are fearful that reporting fraud will lead to bad publicity and potentially damage their reputation and in turn, relationships with key customers, staff and suppliers. They also question whether reporting fraud to the police is the most effective method of dealing with it.”
Mike said: “The six-fold increase in reported fraud in the South West is primarily due to two high value cases which came to trial during the period.  The majority of cases prosecuted in the South West involved the private rather than public sectors.  
"This also bucks the national trend where public sector fraud has almost doubled since last year.  In my experience, fraud is more likely to be uncovered during recessionary market conditions and it would appear that those in the South West are continuing to use the traditional routes of tackling fraud and reporting it to the authorities.”
The majority of fraud committed in the UK is procurement fraud and yet this is not the most common type of fraud being reported. BDO’s figures suggest that companies are choosing to deal with complex procurement fraud internally. The most common frauds reported include theft and cash fraud, third party fraud – for example involving suppliers or customers – tax fraud and money laundering.
BDO’s top tips for tackling fraud

- Don’t neglect over-performance: If something is too good to be true, it usually is.

- Review changes to the supplier master file: It is very important that an exception report of any changes to standing data (e.g. the supplier master file) is produced and robustly reviewed.
- Monitor the car park: Although it is stupid to flaunt your ill gotten gains at work, most fraudsters do.
-  Perform background checks on new recruits: Don’t give those with a flawed employment history the chance to commit fraud in your company.
- Pay attention to morale: Fraudsters are often dissatisfied with their work and rationalise their entitlement to further reward.
- Investigate high staff turnover: Exit interviews for departing staff can be used to detect potential problems.
- Consider remote locations: They often get significantly less management time.
-  Conduct zero based budgeting: Fraudsters typically start at a small scale to test detection, before steadily increasing their greed. Rather than relying wholly on trend against prior year, embark on a ‘zero based budgeting’ exercise to catch them out.
- Pay attention to areas where there is no physical product: Such areas are often more susceptible to procurement fraud.
- Assess IT vulnerability: Consider administrative controls and passwords, prevention of unauthorised software installation and blocking the copying of data to USB devices.
- Be wary of false accounting: Bonuses and job security can create significant pressure.
- Review your bonus structure: Is it fair, transparent and aligned to long term success?






Comments are closed.


Reach tens of thousands of senior business people across Bristol for just £120 a month. Email for more information.