UK fraud figures hit a record £1.1 billion in the first six months of this year, with managers and staff being responsible for a quarter of it, according to KPMG.
The amount of fraudulent activity committed rose 59% over the same period last year, the management consultancy’s Fraud Barometer revealed. Although government agencies have traditionally been hit hardest in terms of number of cases and value of such incidents, the private sector is also starting to come under increasing attack.
For the first time, it was subject to almost half of all fraudulent activity in volume terms, with the average case value jumping to £4.2 million from £2.5 million in January to June 2010.
Hitesh Patel, KPMG’s forensic partner, said: “The evolution of ecommerce, as well as increased reliance on automated payment systems and the ability of professional criminals to stay one step ahead, has swollen overall UK fraud figures.”
Although it was just as prevalent in large organisations as small-to-medium enterprises, the latter were more likely to suffer “dire consequences” because such activity often led to “significant cash flow problems resulting in redundancies – and at worst a fight for survival,” he added.
The situation was illustrated by a Wirral-based business, which was “brought to its knees” by an in-house accountant who stole nearly £170,000 and then bragged about his lavish lifestyle on the internet as the company suffered numerous job losses, Patel said.
And internal fraud committed by employees at all levels of seniority was on the up, the study indicated, rising from £181 million last year to £225 million this year. While employee fraud costs organisations an average of £708,000 per case, however, management fraud cost an average of £7.3 million.
“Operating in positions of trust and authority, helping them conceal their tracks with greater ease – the more senior the employee, the more damage they can inflict when acting fraudulently,” Patel said.
The majority of fraud was committed by professional criminals, however, with the amount perpetrated by such criminal gangs rising by 107% in the first half of this year.