Fraud breaks £1bn barrier in six months

Research from BDO shows that the value of fraud in the first six months of the year has risen to just over £1bn, the first time it has reached that level since regular reports were launched by the firm seven years ago.

Simon Bevan, head of fraud services at BDO, said the recession was seeing a rise in "revenue dilution fraud" where managers set up companies within companies or divert lucrative contracts away from their own companies to third parties.

He said there was also a rise in insider dealing.

"We have combination of political pressure and the understandable desire, in a downturn, for the public sector and corporates to be seen to have a zero tolerance policy. We are therefore likely to see increasing regulatory action."

Bevan expects an increasingly robust response from regulators. He added that there was anecdotal evidence that law firms were beginning to hire specialists in market abuse.

The research also revealed that the average fraud is now almost £6m, a rise from the £5m of last year.

Bevan added: "Fraud is as prevalent now as it has even been and companies need to turn the vigilance screm up a couple more notches in recessionary times. "

Around 16% of reported fraud has its origins with internal management while 17% begins with third party customers and suppliers. Almost half of all fraud is committed in the finance and insurance sectors.

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