Fraud increasing in cost & complexity as half of UK organisations now victims

• Half of UK organisations have been victims of fraud in the last two years
• UK organisations increasingly attractive targets for global fraudsters
• Cybercrime the most prevalent fraud in the UK, but sharp rise in bribery

Half of UK organisations surveyed in PwC’s latest Global Economic Crime & Fraud Survey were victims of fraud and/or economic crime in the last two years, with a quarter (24%) having lost more than USD $1 million (£720,000). PwC also found that the UK was more vulnerable to high-value attacks than the rest of the world; over half (51%) of the UK’s crimes resulted in losses of more than $100,000 (£72,000), compared to 37% globally.

Despite this, PwC says UK organisations are not doing enough to actively prevent fraud with only half of respondents admitting to carrying out a fraud risk assessment in the last two years – a vital first step in putting appropriate prevention measures in place. PwC’s ninth biennial Global Economic Crime & Fraud Survey, surveyed more than 7,000 decision-makers across 123 countries, with 146 surveyed in the UK, including in Northern Ireland.

Fran Marwood, forensics partner at PwC, said that, while the direct cost of fraud to UK business continues to rise, the wider, indirect effects can be far more damaging and costly:

“UK organisations told us that the cost and disruption, as well as the impact on employee morale, business relations and brand, are big hidden costs.

“Uncertainty can encourage fraudsters to exploit weaknesses in an organisation’s systems, so in this current period of rapid business change, understanding the risks and possible avenues for attack is crucial.

“Yet, against this backdrop, only half of UK businesses say they are currently analysing the risks posed to them by fraud.”

This year’s study shows a shift towards technology-enabled crime like bribery and corruption, and procurement fraud (see Figure 1). Cybercrime is now the most prevalent, overtaking asset theft for the first time since the survey began in 2002.

Nearly half (49%) of UK undertakings admitting to being cybercrime victims, with 42% of respondents expecting that cybercrime will continue to have the greatest business impact, over the next two years.

Fran Marwood warned that much of the cybercrime in the UK comes from external overseas threats:

“As the world’s fifth largest economy, it’s no surprise that UK organisations are seen as an attractive target by global fraudsters. Over half of our respondents reported suffering phishing attacks, which are initiated on a huge scale to play the odds of even just a few responses.

“But ultimately cyber defence relies on people understanding the threat, so training, awareness and escalation routes are just as important as defensive technology.”

Figure 1: Most commonly reported types of economic crime / fraud in the UK

Some general findings included:

• More than half (55%) of UK frauds were committed by external parties ( with hackers, customers and intermediaries the most common)
• When it came to ‘internal’ frauds, half were committed by senior management, up from 18% in 2016
• There was a sharp increase in bribery and corruption, up from 6% in 2016 to 23% in this year’s survey. However, this jump may reflect the UK’s robust introduction of anti-bribery measures leading to increased transparency rather than an actual rise in cases
• UK organisations are spending more than ever on compliance - over half (54%) saw an increase in their compliance spend in the last two years.
  

Despite a relentless flow of attempted economic fraud, the PwC research suggests that UK organisations are relying heavily on people with the skills to detect it, rather than employing more advanced technologies. Manual anti-fraud controls were reported to be the most successful, uncovering 19% of frauds, followed by tip-offs / whistleblowing (16%), and internal audit (15%).

Fran Marwood concluded:

“The increase in reported bribery is of particular interest, coming at a time when UK business is ahead of most global territories from a compliance perspective, largely as a result of measures required by the UK Bribery Act.

“The effectiveness of these measures, additional ethical due diligence and the huge compliance resources introduced over the last few years are clearly succeeding in flushing out historic cases.

“While increased levels of reported crime can’t always be directly equated to the actual crimes increasing, the study shows a greater awareness and understanding of the various types, perpetrators, impacts and costs of fraud amongst UK organisations. 

“However there’s still more business can do; particularly in understanding and acting on the specific risks they face from fraud, cyber threats and bribery, as well as investing in people and technology to combat the evolving threat.”

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Notes for editors

• The full Global Economic Crime & Fraud Survey can be downloaded here and the UK version here
• The online survey was carried out between June - September 2017 with 7,228 business decision-makers across 123 countries. 42% of global respondents had 1,000 employees or less; 31% had between 1,001 and 10,000 employees; 24% had over 10,001 employees
• 28% of respondents had annual global turnovers of less than $100 million; 33% had between $100m - $5 billion; 21% had over $5 billion
• 42% of respondents were from publicly traded companies; 45% were private companies; 11% were public sector organisations or NGOs
• Amongst those sectors reporting the highest levels of fraud globally were: insurance, communications (including telecoms) (59%), financial services (58%), retail and consumer goods (56%) and government owned enterprises (52%)

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