The amount lost to fraud by businesses and the public sector increased by 76% in 2009, with both number and size of fraud increasing exponentially during the recession, according to research by BDO LLP.
Fraud broke the £2-billion (Cdn $3.8-billion) barrier last year and is predicted to increase three-fold over the next three years, Lloyd’s reports in a release.
BDO predicts this increase in fraudulent activity is only a hint of things to come. Annual corporate fraud could become more of an issue with businesses losing as much as £5 billion (Cdn $8.4 billion) in a couple of years’ time.
“Based on my experience of the two previous recessions, I expect that reported fraud will treble over the next two years,” Simon P. Bevan, head of fraud at BDO LLP, told Lloyd’s. “There has always been a lag effect, with reported fraud continuing to rise for at least a couple of years after businesses start to come out of the recession.”
McIntyre Hudson conducted 132 fraud loss measurement exercises in 44 organizations and nine countries in a recent study, The Financial Cost of Fraud Report.
“It found an average of 4.57% was lost, with two-thirds showing losses of between 3% and 9% of total expenditure,” Jim Gee, director of counter fraud services at McIntyre Hudson, told Lloyd’s. “By removing the weaknesses in business processes, it is possible to reduce that loss by 40% within a year.
"Say the figure was 5% of total expenditure. By cutting 40%, you effectively add 2% to the bottom line.”