RiskUKDecember2017

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Annual Fraud Indicator 2017 highlights UK footing colossal £190 billion fraud bill Authority (NFA), which had established the concept and experimented with a variety of methodologies. The NFA published four detailed reports, the last of which was in 2013. The NFA was abolished in 2014 leaving a gap in the measurement of the cost of fraud to the UK: a gap that the partners in this project were very much keen to fill. The partners wanted to build upon the work of the NFA by offering the same detailed estimates of the cost of fraud to the UK, while also using a more developed and consistent methodology to allow dependable comparisons over time. The annual cost of fraud in the UK is £190 billion, which is equal to around £10,000 per family. That’s one of the main findings of the Annual Fraud Indicator 2017 published by Crowe Clark Whitehill and developed in conjunction with both Experian and the Centre for Counter Fraud Studies at the University of Portsmouth. Brian Sims reports on this year’s statistics The 28-page Annual Fraud Indicator (AFI) 2017 highlights the colossal cost of fraud to the UK’s economy. Unless an organisation truly understands the nature and cost of fraud affecting it, how can it possibly apply the right and proportionally resourced solution? How can it begin to track progress in reducing the prevalence and cost of fraud? Lastly, how can it understand the value derived from its investment in countering fraud? The AFI has been developed to help create a benchmark by which, year-on-year, a sectorspecific analysis can be made. An in-depth analysis of fraud levels in the UK economy shows that annual fraud losses are presently indicated to cost £190 billion, private sector losses are estimated to be £140 billion, public sector losses are estimated to be £40.4 billion, charities and charitable Trusts are believed to be losing £2.3 billion and frauds committed directly against individuals are estimated at around the £6.8 billion mark. These numbers are far from insignificant. With the latest National Audit Office and National Crime Agency statistics confirming that fraud has surged to the top of the list of commonly committed crimes, now is the time to identify and measure its cost such that businesses, Government bodies, charities and individuals alike can understand the value of their investment in countering fraud. In 2016, the UK Fraud Costs Measurement Committee published its first AFI. The 2016 AFI built on work undertaken by the National Fraud Team and methodology The research team for this year’s AFI was led by Professor Mark Button, director of the University of Portsmouth’s Centre for Counter Fraud Studies, and included David Shepherd and Dean Blackbourn. The methodology used has been developed in line with the groundbreaking work of the NFA. “The £190 billion cost of fraud represents more than the UK Government spends on health and defence combined or all welfare payments excluding pensions,” explained Professor Mark Button. “In the public sector alone, with fraud losses of £40 billion, this is equivalent to what we pay in national debt interest or spend on defence. This report shows that there are clear differences in the strengths and risks of fraud in the different sectors of the UK economy. The thin resources of the State dedicated to fighting fraud mean that, for most organisations and individuals, the best they can do is protect themselves. Investing in the appropriate strategies to increase their resilience to fraud is the most effective way in which to reduce the risk of fraud occurring.” Nick Mothershaw, director of fraud and identity solutions at Experian, stated in conversation with Risk UK: “This year’s report highlights how the continued growth of procurement fraud remains a great problem for many businesses. Most often, it’s the employees who are instrumental in such fraud. On that basis, vigilance and appropriately vetting staff should be a high priority for all businesses. Making sure you employ the right people and that your existing staff members, and particularly those in positions of responsibility, are not under duress will help you to avoid potentially costly losses.” 8 www.risk-uk.com
News Analysis: Annual Fraud Indicator 2017 and NHSCFA Mothershaw went on to explain: “Also interesting is that the report shows pension fraud is growing in the public sector. While there are no published figures for the private sector, it’s understood that fraudsters are targeting the Pensions Release (where pension holders, aged over 55, are allowed to withdraw up to 100% of their pension benefits as a cash lump sum, income or a combination of both). It’s worth noting that, while the volume of fraud is low, the value of fraud losses is high, suggesting fraudsters are focusing their attentions on the biggest value areas.” According to Mothershaw, consumers need to be very careful of investment opportunities that are potentially too good to be true. For their part, pension companies need to ensure their ID verification tools are both Best in Class and cost-effective to execute as the Pensions Release is predicted to continue to grow. “In the finance sector,” observed Mothershaw, “plastic card and online banking fraud continues to increase. A new regulation in 2018, in the form of the Payment Services Directive 2, will enforce more robust ID and fraud controls on online payments to address this. Essentially, it will make it much harder for a fraudster to use a victim’s payment card online unless they also gain control of the individual’s online banking details. The regulation should result in a significant decline in plastic card fraud, yielding an increase in detected and prevented frauds as a result.” Launch of NHSCFA In parellel, the new NHS Counter Fraud Authority (NHSCFA) has been given the independence it needs to fight and deter fraud, bribery and corruption that attacks the NHS. It’s a Centre of Excellence employing specialists in intelligence, fraud prevention, computer forensics, fraud investigation, financial investigation, data analysis and communications, all of them working together to detect, reduce and deter economic crime specifically targeting the NHS. Having launched last month, the NHSCFA’s work begins with a focus on five areas. The organisation will be the single expert, intelligence-led organisation providing a centralised investigation capacity for complex economic crime matters in the NHS, support the Department of Health’s strategy for tackling fraudulent activity affecting the NHS, serve as the body leading and influencing the improvement of standards in counter fraud work across the NHS, take the lead in and encourage fraud reporting across the NHS and the wider health group and, last but not least, “The £190 billion cost of fraud represents more than the UK Government spends on health and defence combined or all welfare payments excluding pensions” continue to develop the expertise of staff working for the NHSCFA. Sue Frith, interim CEO of the NHSCFA, said: “As a new, independent, intelligence-led special health authority, we’re wholly dedicated to tackling fraud against the NHS in England. Our creation is good news for the taxpayer, for patients and for the honest majority working in and with the NHS. I’m proud to be leading the new NHS Counter Fraud Authority as we embark on this fight against the fraudsters who target the NHS. I’m working alongside our Board and all of our dedicated staff. We’re delighted to have full backing across the Government and the wider NHS and, indeed, among many other key stakeholders.” Simon Hughes, interim chairman of the NHSCFA, added: “Some of the challenges faced in this work include a limited awareness of fraud among NHS staff and the significant under-reporting of fraud. Many people find it unthinkable that anyone would seek to defraud money meant for healthcare. Our ability to counter fraud has a direct impact on healthcare. Every fraud takes a service away from someone who needs it. This reality must be faced. We can all play our part in turning the tide, ensuring that public money pays for services the public needs and doesn’t line the pockets of criminals. We all use the NHS and will all benefit from securing its resources.” Hughes went on to state: “Establishing the NHS Counter Fraud Authority strengthens our resolve in fighting fraud, bribery and corruption, protecting healthcare and supporting the many thousands of dedicated health service staff, suppliers and contractors.” The Government’s view Lord O’Shaughnessy, the health minister, observed: “Fraud in the healthcare system not only undermines public confidence in the NHS, but also diverts valuable resources away from caring for patients. It’s estimated that prescription fraud alone costs the NHS somewhere in the region of £217 million each year. We created the NHS Counter Fraud Authority so that, for the first time, there’s a dedicated NHS organisation designed to tackle health service fraud and corruption and bring fraudsters to justice.” Further information on the NHSCFA is available online at https://cfa.nhs.uk/ Professor Mark Button BA (Hons) MA PhD FSyI: Director of the University of Portsmouth’s Centre for Counter Fraud Studies The NHS Counter Fraud Authority has been given the independence it needs to fight and deter episodes of fraud, bribery and corruption 9 www.risk-uk.com
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