NW fraud at five-year low says BDO

FRAUD in the region fell to £33.5m in 2012  – its lowest level in five years, according to data from accountancy firm BDO.

Despite the fall – which sees the North West second only to Yorkshire which had the lowest fraud values of £17m – BDO believes the true picture has been lost as many businesses and employees are anxious of blowing the whistle on wrong-doing

The total number of cases in the region was 42 – a similar number to the previous year’s analysis.  2012 cases included a £12m ‘cash for crash’ scam headed by Asid Mallu in Manchester, a £4.5m VAT fraud by metal traders in Blackburn and a woman who stole £3m from her employer in Prescot, Merseyside.

Alex Marsden, forensic partner at BDO in Manchester, said: “It has been clear for some time that the vast majority of both public and private sector fraud is not reported, with people not wanting to involve the police. But what we are finding is that there is a frightening lack of knowledge about the potential for civil recovery separate from criminal proceedings, which was confirmed by research undertaken by the Fraud Advisory Panel published in December.

“Although it can be difficult, people need to know that there is an alternative through civil recovery. Businesses need to focus much more on recovery and following the accounting trail rather than just investigating the crime itself and this give themselves a much better chance of getting their money back.”

Across the UK, the value of total reported fraud in 2012 fell by a third to £1.37bn. However tax fraud, worth £603m alone, has doubled in the last two years.

This year’s Fraud Track figures show that VAT fraud alone accounts for 41% of the total UK fraud figure. The current UK VAT gap – the theoretical difference between what the Government expects to collect in sales tax and what it actually collects – is around £10bn with fraud accounting for approximately one third of this figure.

BDO says that in real terms, this equates to £3.3bn missing from the public purse every year – the equivalent to at least 1p off the effective rate of tax for every UK taxpayer.

Alex Marsden adds:  “The fact that tax fraud, and VAT fraud in particular, accounts for such a high proportion of overall fraud, it is evident that this is a seriously under-resourced function of HMRC.”