The value of UK fraud dropped in 2014 despite the highest volume of cases on record, signalling regulators’ growing focus on lower-value, easy-win cases, and raising concerns about the UK’s ability to tackle complex cases.
UK fraud totalled GBP 720 million last year, despite the highest number of reported cases since records began, according to Fraudtrack – the annual study of fraud cases over GBP 50,000 in value by the international accountancy firm BDO.
That is the lowest figure since the London-headquartered accountancy group began publishing Fraudtrack in 2003.
As well as a 31% decrease in total value, there was a 34% drop in the average value of fraud to GBP1.3 million, from GBP 2 million in 2013 and GBP 3.3 million in 2012.
However, that drop in value was accompanied by a rise in volume; the total number of cases rose to 546 from 525 in 2013, leading the author of the report, BDO’s head of fraud, Kaley Crossthwaite, to describe 2014 as “a paradoxical year”, in a statement accompanying the report.
The paradox points to an increased enforcement of low-value fraud in the UK; 74% of cases made up only 9% of the total value, and of the 546 reported cases, 402 were below GBP 0.5 million in value, as enforcement agencies chase smaller, simpler cases.
That should warn against the drawing of too many conclusions from the report, John Milner, head of business crime and fraud at IBB Solicitors, tells CDR. He highlights the impact that just one case, Weavering Capital, could have had on the statistics.
Weavering Capital provided “a healthy start to the 2015 figures to the tune of about GBP 350 million”, when in January, its founder Magnus Peterson, was sentenced to 13 years in prison for eight counts of fraud, forgery, false accounting and fraudulent trading.
The case led to subsequent litigation in the Cayman Islands, as reported this week on CDR, in which two directors were exculpated from liability for the collapse of the fund.
“Had the outcome been in time to hit the 2014 figures,” Milner adds, “we would have seen an increase of more than 50%”.
“The first LIBOR trials will conclude this year and raise the prospect of the 2015 figures being off the scale if they find their way into the statistics.”
Graham Huntley, founding partner of London-based boutique Signature Litigation, tells CDR that the report shows an increase in low-level fraud, while “massive activity, particularly in the financial markets, which most ordinary people would regard as redolent of fraud, is being handled by domestic and international regulatory action rather than by private actions in the civil courts.”
When those disputes are taken into account, “the total value of fraud has clearly risen”, despite the report’s figures, he added.
Indeed the value of fraud in the financial services sector more than halved, dropping by 56% to GBP 236 million from GBP 532 million the previous year. However, the volume of cases, which fell from 132 to 118, remains high compared to other industries.
Fraud in the financial sector is dominated by money laundering and mortgages, accounting for 47% of cases and 74% of total value.
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Feb 26, 2021
Feb 26, 2021