BDO reports big hike in reported fraud

Jan 26 2010 by Henryk Zientek, Huddersfield Daily Examiner

REPORTED fraud more than doubled in Yorkshire last year, latest figures have revealed.

Specialist fraud investigators at BDO said fraud totalled £280m in the region last year against £133m in 2008.

The £147m increase in Yorkshire and the north-east represents the second largest hike in reported fraud levels nationally – with the region just behind London and the south-east.

Nationally, the amount lost by businesses and the public sector to larger frauds increased last year by 76% during the recession – with both the number and size of frauds increasing dramatically.

And BDO warned that worse was to come. Annual reported corporate fraud could hit the £5bn mark in the next few years as more fraud is uncovered through management questioning costs more closely and tighter cashflow and credit making fraud harder to hide.

Simon Bevan, head of fraud at BDO in West Yorkshire, said: “2009 saw the steepest increase since our report began seven years ago – with the average value of each fraud now over £5m compared to £1.8m in 2003.

“Based on my experience of the two previous recessions, I expect that reported fraud will treble over the next two years. There has always been a lag effect, with reported fraud continuing to rise for at least a couple of years after businesses start to come out of the recession.

“A large part of this will be a tidal wave of fraudulent borrowing that has only just started to appear – particularly through use of over-valued properties as security for loans – while the property market was booming.

“Many of these frauds are yet to be recognised by the banks, which still have them classified as non-performing loans.”

Said Mr Bevan: “It is only when specialist recovery departments start thorough investigations and eventually litigating against alleged dishonest borrowers and their complicit advisers that the true nature of these potentially horrendous fraud losses will come to light.

“It will take many years for the excesses of the past years to work through the system.”