Fraud cases in NW soar in value from £52m to £500m in one year

Richard Cameron-Williams

The North West has overtaken Yorkshire as the UK fraud hotspot, outside London, new research shows.

The value of fraud in the region soared from £52m to £500m, despite the number of reported cases in 2019 holding at the 2018 figure of 55.

Research by business advisory firm BDO shows that the total value of UK fraud has more than doubled in the past year from £746.3m to £1.7bn.

And a warning has been sounded that the COVID-19 outbreak could lead to a spike in fraud as scammers take advantage of vulnerable individuals and businesses.

The average value of fraud in the North West also increased dramatically to more than £9m.

The growth in value for the region was largely down to a Lancashire-based scammer accused of two cases of fraud involving an airport parking scheme and a separate investment scam, totalling £436m.

This analysis, based on reported fraud cases over £50,000 in the UK, reveals that the UK-wide picture shows a rise in value, but the number of reported cases has dropped by 12% – with 464 cases of fraud reported in 2019 compared with 525 in 2018.

Fraudsters are now understood to be taking advantage of the COVID-19 outbreak, with mass home working and operational shifts to e-commerce opening up new opportunities for criminals to target companies.

Richard Cameron Williams, partner in BDO’s Northern forensics team said: “Despite the volume of reported fraud falling last year, the rise in value suggests that sophisticated fraudsters are becoming increasingly predatory.

“We’ve seen a high-profile example of this in the North West with two cases, accounting for more than 85% of the overall value in the region.

“Compounding this, COVID-19 has provided a fertile breeding ground for fraudulent activity and we’re anticipating a spike in cases this year.

“Now, more than ever, companies and individuals must remain vigilant and sceptical in order to protect themselves.

“Firms should focus on controls, must not ignore red flags, and need to be confident enough to challenge in the way they did prior to this pandemic in order to remain safe.”

Fraud relating to the unauthorised or misuse of assets recorded the highest total value, rising from £115m in 2018 to £671m in 2019.

This increase was largely down to two significant cases, one including a collapsed investment firm owing money to 11,600 savers, and the second involving a businessman who defrauded investors and his company out of £250m.

The second highest value related to third-party fraud, which more than doubled in a year, bringing the total value to just over £522m, up from £181m in 2018. A large number of these cases relate to employees or suppliers of businesses.

Not all types of fraud saw a rise in value, with cases relating to tax and to theft and cash fraud dropping by 13% and nine per cent in value, bringing the total cost of fraudulent activity in these areas in 2019 to £116m and £29m, respectively.

Richard added: “We know that these figures are the tip of the iceberg and as many as one in five frauds go unreported, with businesses often keen to avoid the reputational damage that fraudulent activity can bring.

“With third-party and employee fraud increasing in value and many businesses shifting priorities and acclimatising to new ways of working, business leaders and individuals must remain more vigilant than ever.

“It is vital to have a healthy level of scepticism and robust controls and procedures to manage the risk of both internal and external fraud.”