In recent years Yorkshire companies have had to battle hard against the rise in reported fraud cases. However, figures from BDO’s 2011 Yorkshire Report show a very different picture. Although the number of reported fraud cases has dropped, there is strong evidence that the underlying trend remains upwards.
Despite the headline fall in the value of UK fraud cases from £2bn in 2009 to £1.4bn in 2010, there appears to be little reason for complacency. It seems likely that the figures have been skewed by two main factors: the trial dates of major fraud cases and the fact that in economic downturns, whistle blowers tend to be less active.
There is always a time lag between downturn and fraud detection, but this time we are seeing a much greater delay. Companies were understandably pre-occupied during 2010 with keeping their businesses going, managing cash flow and maintaining good terms with their bankers. Now we are beginning to see lending institutions starting to unravel and correct some of the latent problems in their customer books, whilst closely and carefully managing their portfolios.
Mortgage fraud, for example, is ahead of the curve. It rose in 2010 as pressure on borrowers and tenants meant that banks, alerted by missed payments, took a closer look at individual cases. We predict that other sectors will now start to do the same as businesses and their lenders, who have been focused on riding out the recession, continue to focus down on every cost and activity, uncovering fraud as they do so.
Public sector cuts will also have an impact. Fraud detection resources will be reduced as police numbers are cut and as people’s pay decreases, this may encourage some to commit fraud.
Next year’s Yorkshire Report could reveal a completely different picture and show that the number of cases of reported fraud has actually increased dramatically. During the recession few companies were willing to risk cash and fees to seek settlements. Now we are seeing evidence that they are seeking out legal and accounting services to provide forensic and expert witness services. Concerns about the Bribery Act will also play a part and businesses need to keep a close eye on this piece of legislation to avoid being caught out.
So the question is, what can Yorkshire’s businesses do to protect themselves against fraud? Well, my advice would be to question everything. If the figures and the messages being received are too good to be true, then they probably are. And if confidence returns and the recovery speeds up, don’t relax, keep asking those questions.