VARs urged to sharpen up as fraud set to soar

BDO Stoy Hayward report recommends firms be more diligent when recruiting

The dark side: firms need to check who they are recruiting

Resellers have been urged to keep a close eye on their order books and recruitment processes as fraud is predicted to mushroom this year.

Auditor BDO Stoy Hayward’s annual Fraudtrack report reveals that total reported fraud in the UK rose by 14 per cent last year and stood at £1.19bn.

Two-thirds of attacks affected the financial and insurance sector, while the retail sector experienced a 62 per cent rise in incidents over the past two years.

BDO partner Simon Bevan authored the report and told CRN he expected fraud to increase by between 20 and 30 per cent in 2009. He indicated fraud perpetrated over the past few years would be uncovered as the economic downturn prompted businesses to be more stringent.

“Some industries spend a lot of time looking externally, but nearly two-thirds of this fraud is committed by people with whom you have a business relationship,” he said.
“If you only recruit honest people, no matter how poor your systems, you will not be defrauded.”

Bevan revealed that 29 per cent of fraud is committed by management, nine per cent by employees and 23 per cent by third parties, including suppliers and customers. The total UK cost of third-party fraud last year was £273m, an increase of 347 per cent on the 2007 figure.

Bevan claimed fraud was a problem for SMEs and large enterprises alike. “The problem for small businesses is that you may not have enough people for a division of duties,” he said. “You need to be aware of high-risk areas.”

Eddie Pacey, director of credit at distributor Bell Micro, claimed fraud was a growing problem for resellers. “Fraud is rising in our sector because of the nature of what we sell.

“The worrying aspect is that it has permeated from distributors into the reseller space. Some VARs are less careful and may need to sharpen up,” he added.