Firms urged to act to prevent fraud as cases expected to spike during lockdown

Businesses need stringent measures to protect themselves from fraud, with the Covid-19 pandemic providing a “fertile breeding ground” for such crimes, according to a report out today.
Incidents of fraud are expected to spike as Covid-19 provides a ‘breeding ground’ for criminals. Picture: contributed.Incidents of fraud are expected to spike as Covid-19 provides a ‘breeding ground’ for criminals. Picture: contributed.
Incidents of fraud are expected to spike as Covid-19 provides a ‘breeding ground’ for criminals. Picture: contributed.

Fraud cases in Scotland are expected to spike this year, as mass home working and operational shifts to e-commerce amid the outbreak open up new opportunities for criminals to target companies, the study from accountancy and business advisory business BDO LLP also found.

It comes after the firm, whose Scottish office network comprises Edinburgh and Glasgow, found that the total value of fraud in Scotland reached £54 million in 2019, up from £30.4m in the previous year.

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The average value of fraud in Scotland last year was £1.4m, below the national average of £3.6m. Notable cases north of the Border include a “Ponzi scheme” that defrauded investors of funds worth £12.8m and a case investigated by HMRC and police in Scotland involving a £12m VAT and money laundering scam.

BDO said the analysis, based on reported fraud cases exceeding £50,000 in the UK, reveals that the UK-wide picture shows a rise in value, but the number of reported cases has dropped by 12 per cent. There were 464 cases of fraud reported in 2019 compared with 525 in 2018, and 38 of these took place in Scotland.

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Sat Plaha, partner and regional head of forensics at BDO, said: “Despite the decline in fraud value and volume in Scotland last year, Covid-19 has provided a fertile breeding ground for fraudulent activity and we’re anticipating a spike in cases this year.

“Now, more than ever, companies and individuals must remain vigilant and sceptical in order to protect themselves. Firms should focus on controls, must not ignore red flags, and need to be confident enough to challenge in the way they did prior to this pandemic in order to remain safe.”

Fraud relating to the unauthorised or misuse of assets recorded the highest total value across the UK, rising to £671m in 2019 from £115m. This increase was largely down to two significant cases, one including a collapsed investment firm owing money to 11,600 savers, and the second involving a businessman who defrauded investors and his company out of £250m.

The second-highest value related to third-party fraud, which more than doubled in a year, bringing the total value to just over £522m up from £181m in 2018. A large number of these cases relate to employees or suppliers of businesses.

Plaha said: “We know that these figures are the tip of the iceberg and as many as one in five frauds go unreported, with businesses often keen to avoid the reputational damage that fraudulent activity can bring… business leaders and individuals must remain more vigilant than ever.

“It is vital to have a healthy level of scepticism and robust controls and procedures to manage the risk of both internal and external fraud.”

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