According to the latest KPMG Fraud Barometer, 2011 was a record year for fraud, reaching a massive £3.5bn.
But the market watcher warned that the tough economy was likely to make the situation worse before it got better.
Despite a 20 per cent drop in recorded cases for 2011, fraud value reached an all-time high, with management fraud up 74 per cent and investors looking particularly vulnerable as losses from fraud doubled over the 12 months.
Hitesh Patel, KPMG forensic partner, said: “2011 was an extraordinary year for fraudsters – as demonstrated by the record losses through large-scale cases of fraud which dominated the headlines.
"The economic uncertainty has been the double-edged sword behind these numbers: companies and government agencies have rooted out more fraud through implementing austerity measures and operational changes, while at the same time the pressures on individuals as a result of the downturn continues to act as a catalyst for more fraud being perpetrated. These figures represent the thin edge of a much bigger wedge.”
Government and the public sector were a particular target for the fraudsters, with the sector seeing the highest number of cases recorded during the period.
“At a time when the country is battling with a huge deficit, the dual assault on social welfare and infrastructure budgets is far from a victimless crime,” Patel added. “It is a problem that affects us all as funds are deprived from the front line, leading to higher levels of taxation, insurance costs and prices for products and services.”
Worryingly, professional criminals are getting even more organised, accounting for 98 cases worth £1.4bn in economic crime during the year.
Patel said: “Their illegal activities have a corrosive impact on the civil society. The proceeds from white-collar crime such as sale of counterfeit goods and financial fraud are often redeployed to more serious nefarious activities such as human and drugs trafficking and terrorism, among others.”
And as the economy continues to struggle, he warned the situation will not ease up and stressed that firms should be on their guard.
“Sadly, due to the current economic circumstances the forecast is that the situation will get worse before it gets better. It is important that organisations do not become myopic on this point and ensure they have robust prevention and detection mechanisms so they do not lose value through the back door that they have worked so hard to preserve through these difficult times," Patel said.
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