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So who is responsible for fraud?
I would like to ask you all a question, who is really responsible for fraud? Julian Siddle 11 October 2014
In June 2013, figures were published showing that fraud in the UK was estimated to have cost the public sector, charities and individuals somewhere between £52 and £85 billion. I’ll repeat that figure again……between £52-£85 BILLION!
Now I say “estimated”, because worryingly no-one knows for sure.
Many instances of fraud are hidden or undetected, many of those that are known about go unreported.
So who is responsible for fraud?
There are many types of fraud, far too many to reel off in this short musing, so what I really want you to ask yourself is..
What is fraud?
Who is committing these frauds?
Who are the victims?
How can we reduce the frequency and impact of fraud?
So let us take the first question – What is fraud?
The majority of fraud is monetary based – This can be financial gain “accumulating wealth” or financial saving “not paying when you should” although both can also easily be perceived as theft.
Let me give you an example.
You are looking online for a new car, you decide to use, say, ebay. Now the seller has exactly what you are looking for and at a bargain price because they are moving overseas and cannot take the car with them. You contact the seller and agree the sale, you transfer money to what you believe is an ebay approved buyer protection scheme, where the car is delivered and once satisfied the car is what was offered funds will be released to the seller. The delivery day comes and you wait…………and wait………..and wait, but no car arrives.
You may find this hard to believe, but in 2013 victims lost a reported £17.8 million to this kind of fraud. I am also aware that this figure is vastly inaccurate as many victims fail to report instances for fear of ridicule or already know there is very little chance of ever seeing their money again.
Now this is clearly an obvious example of fraud, this is the kind of thing I deal with on a daily basis as part of my work with the consumer group Legal Beagles.
But what about the “grey areas”, this all depends on our own perception and moral conscience.
Another example to consider.
You lose your wallet, purse, bag, luggage……….something with “contents”, maybe you are unfortunate enough to be burgled at home.
Thankfully this unfortunate incident is covered by your contents insurance and you are able to claim for your loss. You receive the claim form and begin to list the missing contents.
Cash – You know there was only £50 in there, but your policy says you are covered up to £100…… how much do you say you lost?
Electricals – That games console you received as a present from your dearly departed Grandparent last Christmas, even though it wasn’t the “all singing all dancing, fully loaded”(£100 more expensive) model you really wanted……..which model are you going to say was stolen? Grandma Smith didn’t give you the receipt and unless the insurance assessor is a skilled medium there is no way they will be able to check.
Your partners favourite ornament that you broke and hastily super glued back together after attempting to show your friends that you weren’t too old or unfit to do a handstand……… surely that could have been knocked over during the break in?
After all you have paid your premiums without claiming for the last 10 years, why shouldn’t you tell a white lie?
So who is committing these frauds?
As I have just demonstrated, anyone and everyone has the potential to commit fraud, it is down to our own perception of what is and what isn’t acceptable. Whether the risk of being caught or rewards of getting away with it out weigh each other. Who we perceive the victim to be and the impact it will have on them.
Who are the victims?
Fraud against the public sector (that is local and central government) – £21 billion.
From this £14.1 billion was lost to due to tax fraud and vehicle excise fraud, and £1.9 billion to benefit and tax credit fraud.
These losses have a direct impact on each and every individual within the UK, be it spending cuts to policing, health, education, infrastructure or benefits, or an increase on taxation, inflation or unemployment. The impacts affect us all.
Fraud against the private sector (UK businesses and organisations) – again estimated at £21 billion
This includes payment or banking fraud, accounting fraud, procurement fraud amongst many others. The majority of which were committed internally(86%) as opposed to internally(56%) with 40% experiencing a mixture of both before anyone notices those figures don’t add up!!!
Here is a breakdown of just a few areas of losses in the financial sector alone
Insurance fraud £2.1 billion
Mortgage fraud £1 billion
Plastic card fraud £388 million
Online banking fraud £40 million
Cheque fraud £35 million
Telephone banking fraud £13 million
Many of these losses get passed onto the consumer, through increased costs for services supplied, such as an increase in insurance premiums.
Fraud against the charity sector – estimated at £150 million.
Now this is only those charities with an annual income of over £100,000, this does not include smaller local charities which are of vital support to many in their communities. Worryingly 30% was committed internally.
These losses affect the most vulnerable in society, those that each charity operates to protect, it can have devastating consequences on families and individuals.
Fraud against the individual – that’s you and me – over £9 billion
The main areas of loss have been loosely categorised as the following
mass marketing fraud – £3.5 billion
identity fraud – £3.3 billion
online ticket fraud – £1.5 billion
private rental property fraud – £755 million
pre payment meter scams £2.7 million
In these cases, the key enablers are either identity theft, deception or lack of awareness to the different types of fraud. But with the rapid expansion in the use of technology, more and more fraud is becoming cyber enabled, often overseas, detaching the perpetrator from the victim making detection almost impossible. So what can be done?
How can we reduce the frequency and impact of fraud?
This is a complex question to which there is no definitive answer, I am not naïve enough to believe we can ever stop fraud, however, there are ways we can all help to prevent or disrupt fraud.
Individuals
We need to change our perceptions of fraud, our own actions and awareness of fraud. Remember my earlier examples, your partners treasured ornament that suffered the consequences of a failed acrobatics display? Or the actual amount in that missing wallet? I ask you to think twice before completing that insurance claim form?
We need to be aware and protect against becoming a victim ourselves, is that urgent email really from your bank or from someone trying to steal your details and hard earned cash? Reporting that email before you delete it may just save someone vulnerable from becoming a victim.
The private sector
The private sector needs to protect themselves and their customers from the methods and enablers used to commit fraud. Any suspected activity needs to be investigated, reported and preventative measures taken to stop it happening. Despite businesses being aware of how and where fraud occurs, many fail to act for fear of reputational damage to its brand.
Charities
Again, adequate measures must be in place to detect and prevent losses, damage to the reputation of a charity can have far reaching consequences, especially to the most vulnerable in society who rely on them.
The public sector
Central government needs to increase general awareness of different frauds to all groups. More funds need to be devoted to the Police to prevent, detect, disrupt and investigate fraud. Despite the cost to the UK economy as a whole, there are very few arrests and prosecutions compared to the number of reports it receives. This encourages acts of fraud, as the benefits to the criminal far out weigh the risks of prosecution, making it an attractive activity to organised crime groups and individuals alike. It dissuades victims from reporting and distorts the true numbers of actual occurrences.
If we fail to recognise the impact, or change our perception of fraud even at the most basic levels, then I return to my original question and subject of this talk, who is really responsible for fraud?
In June 2013, figures were published showing that fraud in the UK was estimated to have cost the public sector, charities and individuals somewhere between £52 and £85 billion. I’ll repeat that figure again……between £52-£85 BILLION!
Now I say “estimated”, because worryingly no-one knows for sure.
Many instances of fraud are hidden or undetected, many of those that are known about go unreported.
So who is responsible for fraud?
There are many types of fraud, far too many to reel off in this short musing, so what I really want you to ask yourself is..
What is fraud?
Who is committing these frauds?
Who are the victims?
How can we reduce the frequency and impact of fraud?
So let us take the first question – What is fraud?
The majority of fraud is monetary based – This can be financial gain “accumulating wealth” or financial saving “not paying when you should” although both can also easily be perceived as theft.
Let me give you an example.
You are looking online for a new car, you decide to use, say, ebay. Now the seller has exactly what you are looking for and at a bargain price because they are moving overseas and cannot take the car with them. You contact the seller and agree the sale, you transfer money to what you believe is an ebay approved buyer protection scheme, where the car is delivered and once satisfied the car is what was offered funds will be released to the seller. The delivery day comes and you wait…………and wait………..and wait, but no car arrives.
You may find this hard to believe, but in 2013 victims lost a reported £17.8 million to this kind of fraud. I am also aware that this figure is vastly inaccurate as many victims fail to report instances for fear of ridicule or already know there is very little chance of ever seeing their money again.
Now this is clearly an obvious example of fraud, this is the kind of thing I deal with on a daily basis as part of my work with the consumer group Legal Beagles.
But what about the “grey areas”, this all depends on our own perception and moral conscience.
Another example to consider.
You lose your wallet, purse, bag, luggage……….something with “contents”, maybe you are unfortunate enough to be burgled at home.
Thankfully this unfortunate incident is covered by your contents insurance and you are able to claim for your loss. You receive the claim form and begin to list the missing contents.
Cash – You know there was only £50 in there, but your policy says you are covered up to £100…… how much do you say you lost?
Electricals – That games console you received as a present from your dearly departed Grandparent last Christmas, even though it wasn’t the “all singing all dancing, fully loaded”(£100 more expensive) model you really wanted……..which model are you going to say was stolen? Grandma Smith didn’t give you the receipt and unless the insurance assessor is a skilled medium there is no way they will be able to check.
Your partners favourite ornament that you broke and hastily super glued back together after attempting to show your friends that you weren’t too old or unfit to do a handstand……… surely that could have been knocked over during the break in?
After all you have paid your premiums without claiming for the last 10 years, why shouldn’t you tell a white lie?
So who is committing these frauds?
As I have just demonstrated, anyone and everyone has the potential to commit fraud, it is down to our own perception of what is and what isn’t acceptable. Whether the risk of being caught or rewards of getting away with it out weigh each other. Who we perceive the victim to be and the impact it will have on them.
Who are the victims?
Fraud against the public sector (that is local and central government) – £21 billion.
From this £14.1 billion was lost to due to tax fraud and vehicle excise fraud, and £1.9 billion to benefit and tax credit fraud.
These losses have a direct impact on each and every individual within the UK, be it spending cuts to policing, health, education, infrastructure or benefits, or an increase on taxation, inflation or unemployment. The impacts affect us all.
Fraud against the private sector (UK businesses and organisations) – again estimated at £21 billion
This includes payment or banking fraud, accounting fraud, procurement fraud amongst many others. The majority of which were committed internally(86%) as opposed to internally(56%) with 40% experiencing a mixture of both before anyone notices those figures don’t add up!!!
Here is a breakdown of just a few areas of losses in the financial sector alone
Insurance fraud £2.1 billion
Mortgage fraud £1 billion
Plastic card fraud £388 million
Online banking fraud £40 million
Cheque fraud £35 million
Telephone banking fraud £13 million
Many of these losses get passed onto the consumer, through increased costs for services supplied, such as an increase in insurance premiums.
Fraud against the charity sector – estimated at £150 million.
Now this is only those charities with an annual income of over £100,000, this does not include smaller local charities which are of vital support to many in their communities. Worryingly 30% was committed internally.
These losses affect the most vulnerable in society, those that each charity operates to protect, it can have devastating consequences on families and individuals.
Fraud against the individual – that’s you and me – over £9 billion
The main areas of loss have been loosely categorised as the following
mass marketing fraud – £3.5 billion
identity fraud – £3.3 billion
online ticket fraud – £1.5 billion
private rental property fraud – £755 million
pre payment meter scams £2.7 million
In these cases, the key enablers are either identity theft, deception or lack of awareness to the different types of fraud. But with the rapid expansion in the use of technology, more and more fraud is becoming cyber enabled, often overseas, detaching the perpetrator from the victim making detection almost impossible. So what can be done?
How can we reduce the frequency and impact of fraud?
This is a complex question to which there is no definitive answer, I am not naïve enough to believe we can ever stop fraud, however, there are ways we can all help to prevent or disrupt fraud.
Individuals
We need to change our perceptions of fraud, our own actions and awareness of fraud. Remember my earlier examples, your partners treasured ornament that suffered the consequences of a failed acrobatics display? Or the actual amount in that missing wallet? I ask you to think twice before completing that insurance claim form?
We need to be aware and protect against becoming a victim ourselves, is that urgent email really from your bank or from someone trying to steal your details and hard earned cash? Reporting that email before you delete it may just save someone vulnerable from becoming a victim.
The private sector
The private sector needs to protect themselves and their customers from the methods and enablers used to commit fraud. Any suspected activity needs to be investigated, reported and preventative measures taken to stop it happening. Despite businesses being aware of how and where fraud occurs, many fail to act for fear of reputational damage to its brand.
Charities
Again, adequate measures must be in place to detect and prevent losses, damage to the reputation of a charity can have far reaching consequences, especially to the most vulnerable in society who rely on them.
The public sector
Central government needs to increase general awareness of different frauds to all groups. More funds need to be devoted to the Police to prevent, detect, disrupt and investigate fraud. Despite the cost to the UK economy as a whole, there are very few arrests and prosecutions compared to the number of reports it receives. This encourages acts of fraud, as the benefits to the criminal far out weigh the risks of prosecution, making it an attractive activity to organised crime groups and individuals alike. It dissuades victims from reporting and distorts the true numbers of actual occurrences.
If we fail to recognise the impact, or change our perception of fraud even at the most basic levels, then I return to my original question and subject of this talk, who is really responsible for fraud?
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