Record level fraud costs UK taxpayers £300m

Fraud in the UK hit a record level last year and is costing the taxpayer at least £300m (€424.3m), research showed today.

The value of reported cases of fraud doubled in 2004, from £330m (€466.7m) in 2003 to more than £643m (€909.4m), according to figures from accountants and business advisers BDO Stoy Hayward.

Staff at BDO said that figure was a conservative estimate as it covered fraud reported in the UK for the period January-October 2004.

A spokesman for BDO said: “The eventual amount could easily reach £700m (€990m) or more.”

While the number of cases in 2004 was about the same as the previous year, with 194 valued over £50,000 (€70,700) reported against 211 beforehand, their value last year was much higher, according to BDO.

The biggest loser was the taxpayer, with VAT and tax fraud resulting in £291m (€411.6m) of reported cases compared to £157m (€222m) in 2003, the group said. Other sectors particularly affected included finance, insurance, health care and social assistance.

BDO said fraud cases ranged from the sophisticated to the inept and included the first charge of so-called phishing, in which fraudsters transfer money out of bank accounts after duping online customers into revealing their details.

The research revealed that London and the South East continued to be worst hit, with the value of reported cases rising by nearly five times in 10 months.

In 2003, £100m (€141.4m) of fraud was reported in the region, whilst in 2004 the figure had risen to £475m (€671.8m).

By contrast, only £4m (€5.7m) of fraud was reported in Wales in 2004, making it the least fraudulent part of the UK last year.

However, Scotland saw the value of reported fraud rise six-fold, to £67m (€94.8m) last year from just under £10m (€14.1m) in 2003.

Specialist fraud investigator at BDO Stoy Hayward, Andrew Durant, said there had been a dramatic increase in total value of reported cases during the year.

“It’s worth emphasising these are just ones which are in the public domain, so the UK economy is losing much more,” he said.

“Our research shows part of the problem is that prison sentences for fraudsters are lenient – on average just over two-and-a-half years.

“Given the large sums fraudsters can hide in offshore accounts and property, such sentences are not going to deliver much of a deterrent even if they are caught – two years in an open prison followed by a lifetime on a beach somewhere warm and cheap living off the fraud’s proceeds.”

Companies needed to be able to spot fraudsters early, with one tell-tale sign being middle and senior employees working during Christmas or other holidays for no good reason, he said.