The Nature, Extent and Economic Impact of ... - Cardiff University

The Nature, Extent and Economic Impact of Fraud in the UK
This chapter reports the key findings of the literature on fraud by victim sector, following the victim-centric
typology of frauds (above, in Table 1), while a fuller account of the details of individual studies is provided
in allied annexes. The chapter begins by presenting findings from the private sector, focussing first on
fraud against the financial services sector, then on fraud against the non-financial private sector, and finally
on fraud against individuals. The spotlight is then turned on the public-sector; findings are presented, in
turn, on fraud against central bodies and then against local bodies. 26 Note that those gathering data on
fraud have not hitherto sought to distinguish different types of victims in the way proposed here, and
while some data sources fall naturally within one categorisation, others have spanned different sectors. In
view of this, the sections below do not exactly replicate those presented in Table 1. 27
The data below are principally from 2005, but the lag in awareness of longer-term frauds mean that
some will date back years; and whereas the private sector data are generally based on calendar years, the
public sector typically uses financial years, making impossible their integration into annual snap-shots.
Where data for 2006 have become available, this has been added in footnotes; however for sound
reasons, some data on tax fraud, for example, are available only for 2004-05 or even 2003-04.
A number of sources on fraud do not appear in the pages that follow. This is the case because their
methods do not appear sufficiently sound to include in this critical assessment (e.g. little is known on the
underlying data generating process and/or the internal sources and methods used to estimate the extent
of fraud). This is not to suggest that the estimates of fraud and fraud costs in such sources are wrong,
however, only that the research methods from which they are derived do not appear sufficiently sound,
including for reasons of non-availability.
It should also be noted that certain of the sources below do not ultimately contribute to the aggregate
estimate of the cost of fraud presented in the final section of the report. This is the case because the
costs contained in such sources, while derived from sound social science methods, may be counted
elsewhere (and to include them would be double-counting).
A. Victim sector 1: Fraud against the private sector
Sub- sector 1. Fraud against the financial services sector
As Table 1 and Box 1 indicate, the financial services sector is subject to a wide range of frauds, including
payment card fraud, cheque fraud, insurance fraud, lending fraud, and so forth. Annex 4 lists the sources
that provide information about fraud against this sector, and provides a summary of the methodological
approaches they adopted.
Headline findings
3. FINDINGS
The main findings for each of the reviewed studies are presented below.
1. Fraud: The Facts (APACS, 2006): Plastic card fraud losses in 2005 amounted to £439.4 million,
down from £504.8 million in 2004. Plastic card fraud figures for 2005 comprise the following
categories: card-not-present, £183.2 million; counterfeit, £96.8 million; lost/stolen, £89 million; mailnon-receipt,
£40 million; and card ID-theft, £30.5 million. Cheque fraud losses in 2005 amounted to
26
It should be noted that certain of these sources were also described in the Fraud Review (2006).
27
The most obvious example is that data relating both to companies in the financial services sector and those outside it have
been summarised under a separate heading.
21