The Midlands has lost its unwelcome reputation as the fraud capital of the UK in a dramatic turnaround.
The region has bucked a national trend of rising crime to register a 98 per cent fall in reported fraud compared with the same period last year.
According to BDO Stoy Hayward’s latest FraudTrack research, fraudsters are now moving out of the West Midlands to London and the North West.
The Midlands, last year described as the fraud capital, has seen white collar crime drop from 57 per cent to just one in 12 months – down £311 million to £7 million.
BDO said although this “is in some way positive for the Midlands”, the knock-on effects of the national increase can only be negative.
From a national perspective, the FraudTrack analysis shows fraud figures increased to new heights. Research shows reported fraud cost UK businesses over £705 million in the last six months, a rise of 74 per cent over the same period last year.
The value of reported fraud in April was £317 million and BDO says there is no sign of a let up. Worst hit are finance and insurance. In those six months, reported fraud cost UK bankers and insurers more than £636 million, 90 per cent of the total cost of fraud in the period and a 15-fold increase from last year.
Businesses are warned the biggest threat is employees.
Management fraud accounts for 46 per cent of cases and third party fraud 32 per cent, costing businesses £541 million – 77 per cent of all reported fraud in the first half of 2008.
Sat Plaha, forensics partner at BDO Stoy Hayward in Birmingham said: “Although it is positive to see such a large drop in fraud in the region, this only refers to where the activity occurs. Midlands’ businesses may still be affected from fraud anywhere else in the country. The biggest concern is that fraud in the UK overall has risen significantly.
“What we are essentially saying is management are robbing you blind, suppliers ripping you off left, right and centre and regulators breathing down your neck. As recession deepens, regulatory pressures will increase and regulators will become more intrusive, so be prepared. That’s a triple whammy for businesses. The fraud problem facing UK business could be bigger still. Our latest figures only show reported fraud – the fraud we actually know about.
“What is really scary is these figures don’t include losses incurred by rogue traders. When you add in the fraud not yet uncovered, or which businesses have discovered but don’t wish to expose, the real cost could be much, much higher.”
As economic conditions worsen, the experts at BDO Stoy Hayward believe the problem of UK business fraud is certain to grow.
“The combination of spiralling personal debt and desperate employees spells real danger for business, especially when, sadly, our figures provide clear evidence that commercial organisations of all types and size throughout the UK are currently failing, in some cases quite spectacularly, to get to grips with the fraudulent activity of their staff,” said Mr Plaha.
“We are seeing a dramatic increase in banks, corporates and public sector organisations contacting us directly about our fraud investigation and prevention services and we expect this to rocket further still.
“Interest is coming from board level as senior executives at British businesses are becoming increasingly concerned about fraud risk as the credit crunch bites.”
As well as urging businesses to tighten their anti-fraud procedures, Mr Plaha and his colleagues at BDO Stoy Hayward are keen to see a tougher line on custodial sentencing.