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Fraud Accounted for Record £3.5 Billion Loss in 2011

APS2.5 billion lost in last six months of 2011 alone

By CFOWorld.co.uk staff

January 30, 2012 — CSO — More than APS3.5 billion worth of fraud was recorded in 2011, a record year, as a result of the continuing poor economic conditions, a study has revealed.

KPMG's Fraud Barometer showed that APS2.5 billion worth of fraud was recorded in the second half of the year alone. This figure was partly boosted by five large fraud cases of more than APS50 million coming to court. The study alluded to the APS1.3 billion fraud allegedly committed by UBS rogue trader, Kweku Adoboli, which has not yet come to court. Even without this case, the final six months of the year would still have been the highest recorded six-month figure.

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".

The public sector suffered more than APS1 billion worth of fraud, although the financial sector was the main target, with 59 cases recording a total of APS1.5 billion.

Fraud by management accounted for 57 cases with a value of APS729 million, the report added. This represented a cost increase of 74 percent, despite a similar number of cases.

The report said: "Management often inflict the greatest damage to an organisation as they are able to operate fraudulently with greater ease by virtue of the trust and authority placed in them and their ability to conceal their tracks more convincingly."

Read more about fraud prevention in CSOonline's Fraud Prevention section.