The National Fraud Authority Reveals the True Extent of the UK's £30bn Fraud loss

NFA REVEALS TRUE EXTENT OF UK’S £30BN FRAUD LOSS

The National Fraud Authority (NFA) has released the UK's first comprehensive fraud estimate (21 January 2010), which estimates that fraud costs the UK over £30bn a year. The figure is published in the ‘National Fraud Authority Annual Fraud Indicator’.

The new £30bn national fraud estimate is far more comprehensive than the last widely accepted figure of £13bn from the ACPO (Levi) report, ‘The Nature, Extent and Economic Impact of Fraud in the UK 2007’. That figure captured only a proportion of the true fraud loss, as it only referenced publicly available information. The new higher figure is the result of the NFA collating previously unpublished fraud-loss figures and producing its own fraud estimates in areas where fraud data was unavailable.

The report and overall fraud-loss estimate will enable the NFA and government to develop clearer priorities to prevent, detect and deter fraudsters and identify those areas of fraud that cause the most harm to the UK economy and to tackle it more effectively.

Both the government and NFA are already working hard to crack down on fraud. As a result of the government's concerns over public-sector fraud, it proposed new measures to combat this costly and harmful crime in a recent White Paper, 'Smarter Government', published in December 2009, which called for the setting up of a cross-government task force to tackle public-sector fraud. NFA will now lead this task force, which hopes to significantly reduce the impact fraud has on government. The measurement that government already undertakes will be invaluable in informing this new task force.

The NFA, the government's strategic lead agency on fraud, has also recently launched Action Fraud, the UK's first national fraud-reporting centre. The service is a single point of contact for fraud victims, where they can both report a fraud and seek guidance and advice.

Based predominantly on 2008 data, the current fraud-loss figures were collated by a specialist team at the NFA. Using information gathered from a cross-section of public- and private-sector agencies, the public sector accounts for 58 per cent of the total figure, the private sector 31 per cent and fraud against individuals 12 per cent.

It is important to note that the public-sector figures reflect more mature and sophisticated measurement processes and a willingness to share this data for inclusion in the NFA's first fraud measure. Private- and voluntary-sector fraud information is significantly patchier. The figures relating to these sectors are as accurate as possible but nevertheless likely to underestimate the total private-sector amount.

In addition, the public-sector amount represents a relatively small percentage when taken in context of the sector's overall turnover. For example, within this figure tax fraud, the highest single area of fraud loss, estimated at £15.2bn, is approximately 3 per cent of total tax liabilities. At the Department for Work and Pensions (DWP), fraud loss is estimated at £1.1bn, which is 0.8 per cent of total benefit expenditure.

In the private sector, the report shows that the financial services industry recorded the highest loss to fraudsters, estimated to be £3.8bn, with £1bn in mortgage fraud and over £2bn lost in insurance fraud, with fraud in plastic cards, online banking and cheques comprising most of the remainder. The consumer goods and manufacturing industry are estimated to have lost £1.3bn and £1 billion respectively. The technology, media and telecommunications industry had losses of £948mn. Credit and debit card fraud is estimated to be 0.1 per cent of total transactions.

Consumers are also becoming more willing to report fraud, and in mass-marketing frauds, such as share-sale fraud and lottery and loan scams, losses amounted to £3.5bn.

Attorney General Baroness Scotland QC, who superintends the NFA, said "The NFA Annual Fraud Indicator is a milestone in tackling fraud. It means we now have a much more accurate fraud picture, which is crucial so we can better target fraudsters.

"However, we have a way to go. We need more organisations to measure and report the money they lose to fraud, so we can continue to build our knowledge and response to this endemic crime."

CEO of the NFA Dr Bernard Herdan said "The NFA's unique position has allowed us to work with the counter-fraud community to build the UK's most reliable and comprehensive fraud-loss estimate ever. Although the figure appears on the face of it far greater than the previous estimate, we know this is because we have included many additional figures that other studies have not.

"With this vital information we can develop clearer priorities to prevent, detect and deter fraudsters. We will use the data to help identify those areas of fraud that cause the most harm to the UK economy. Reducing the cost of fraud is important but, even more significantly, I want to stop more people from becoming victims. I have seen firsthand the devastating effects fraud can have. It destroys lives and livelihoods."

ACPO lead for Economic Crime, Commissioner Mike Bowron of the City of London Police, welcoming the report, said "We always believed that the true cost of fraud could be much higher than previous estimates. It is vital that we ensure that the methodology used to measure the cost of fraud on the UK economy is as up to date and as comprehensive as is possible. We can then have confidence when using this data to help support and inform government policy in this important area of policing.

"As head of the national lead force for the investigation of fraud, I know the destructive effects that this type of crime can have. We look forward to continuing our work with the NFA and the rest of the UK's counter-fraud community and building upon our recent successes."
The author of the 2005 estimate, Professor Michael Levi, has also welcomed the new figure: "The NFA should be applauded for these initial efforts at improving our map of fraud. However, this measurement is just the beginning. We now need to use this data to reflect on what we can do about our vulnerabilities and what we need from ourselves and from others to tackle them better.

"The National Fraud Authority (NFA)
The NFA, established in 2008, is the government's strategic lead organisation on counter-fraud activity in the UK. It works with a range of stakeholders across the private, public and third sector. The authority manages 15 priority areas, which include improving data sharing between public and private organisations, mass marketing fraud, share sale and mortgage fraud, ID fraud and improving victim support. For more information about the NFA visit: www.attorneygeneral.gov.uk/nfa