fraud


Jeremy Cooper, Crowe Clark Whitehill managing partner of the Thames Valley office, invited journalist John Burbedge to talk to national partner Jim Gee, the firm’s head of forensic and counter fraud services


Fraud: Now, it’s as common as catching a cold


“The annual cost of fraud to the UK economy* is now £190 billion – more than the Government spends on health and defence combined; more than all the UK’s revenue from income tax. It equates to around £10,000 per UK family.”


Of that colossal fraud burden, £140.4b (74%) relates to the private sector, £40.4b the public sector, £6.8b to individuals and £2.3b to charities, explained Jim Gee in a cool matter-of-fact manner almost as unnerving as his words.


But then, Gee knows this enemy very well and assisted by Crowe colleagues and other sector experts he is constantly and pragmatically fighting the ongoing international battle against fraud.


Gee chairs the Oversight Board of the United Kingdom Fraud Costs Measurement Committee (UKFCMC) that annually estimates the total cost of fraud – a very detailed evaluation of all known fraud plus criminal ‘known unknown’ activity. He also chairs the Advisory Panel for the Centre for Counter Fraud Studies, which provides the largest European repository of data, research and knowledge about fraud, and importantly countering it.


Therefore, his words are definitely worth noting.


Who’s winning: Us or the bad guys?


“Nationally the situation is not a good one. I would not have believed it 20 years ago, but today fraud is the most common crime in this country with 54% of all crime (5.8 milion crimes) being fraud and cybercrime related. We have an epidemic of fraud and we need to respond to it.


“We can’t remove fraud entirely, it is with us, so we need to establish at what level and then minimise it.


“The bad guys are continually changing, reviewing, and updating their methodologies to make sure they get the greatest benefits for the least risk.


“Fraud is a continually evolving problem like a clinical virus, which makes it


14 businessmag.co.uk Jeremy Cooper (left) and Jim Gee with the UK’s 2017 Annual Fraud Indicator report


intrinsically difficult for controls to work effectively.


“Like coughs and colds, you can’t say you’ll never suffer one, but you can help minimise how often and how long you are infected. It’s not just about building the security wall, but managing a fraud and recovering from it. What really matters is the strength of your business’s immune system.


“Individual organisations doing the right things are winning. We have examples of Crowe clients cutting their total cost of fraud by up to 40% in 12 months.


“The average percentage cost of fraud to a business is just under 6%. With profit margins in the low percentages, reducing fraud can make a significant difference to business profitability.


“Organisations should view fraud as an ever-present, ongoing business cost, not as sporadic marginal events that they hope to avoid.”


And where is fraud happening most within our region?


Everywhere, regardless of industry or business size, from Oxford to the South


Coast, Newbury to west London, said Gee.


“Wherever there is wealth and a developing economy there are fraudsters and cyber criminals. Like any legitimate corporation they will look for where the market is richest and will bring them their greatest ill-gotten gains.


“The only difference – in any sector – is between those organisations that do protect themselves well against fraud, and those that don’t. There is a clear correlation – those better prepared and protected, lose less," said Gee.


How much are victims losing?


The scale for fraud resilience is 0-50, the best being 50. Organisations rating less than 15 lose around 10% or more of their potential revenue; those scoring over 40 lose roughly 1% – “but that’s as low as it gets.” New types of fraud are continually being invented and there is a lag-time until they are spotted and tackled, explained Gee.


“It’s not what you detect – most fraud is ‘high volume/low value’ making it hard to detect and only one 30th of


THE BUSINESS MAGAZINE – JANUARY/FEBRUARY 2018


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