Fraud is on the decrease in terms of value, according to the latest BDO FraudTrack Report.
The average value of fraud has dropped by more than a third due to the trend for large complex cases to be dealt with outside the judicial system, from £3.3m in 2012 to £2.0m in 2013 and £1.3m in 2014, although volumes remain high.
The total value of fraud in 2014 was £720m, a decrease of 31% from the previous year and the lowest value since FraudTrack started in 2003. Financial Services fraud fell to its lowest value since 2008 falling 56% in 2014 to £236m.
However, non-corporate fraud prosecutions rose 45% to their highest levels since 2006.
BDO partner Kaley Crossthwaite, the author of the report, says: “One of the reasons why we have seen the lowest total value of fraud since 2003 is due to a growing trend for high value complex fraud to be dealt with outside of the judicial system and out of the public eye.
“Companies are increasingly assessing the reputational cost to their brands of a public case against the cost of pursuing the perpetrators of the fraud through the courts. This is leading to large numbers of cases being dealt with privately in-house and through alternative remedies.
There is a clear correlation emerging between low value crime being reported and taken through the courts which is deemed to be less damaging to corporate reputations, in opposition to those cases of large financial loss being dealt with through other means of remediation.”
While the average value of reported fraud fell by 34% to £1.3m in 2014, just two frauds (a film tax evasion case, and a money laundering operation at a bureaux de change) accounted for 31% of total reported frauds in 2014. Without these two cases, the average value of fraud was £0.9m which is a 55% fall from 2013.
Surprisingly, the total value of fraud in finance and insurance more than halved although volume of fraud remains high.
Crossthwaite says: “In line with the paradoxical trend in fraud, the value of fraud in the financial services sector has plummeted despite volumes remaining high with money laundering in particular also following this trend.”
