Gavin Hinks, Accountancy Age, Monday 19 July 2010 at 11:57:00

BDO research reveals fraud climbing steeply

Research from BDO shows that the value of fraud in the first six months ofthe year has risen to just over 1bn, the first time it has reached that levelsince regular reports were launched by the firm seven years ago.

Simon Bevan, head of fraud services at BDO, said the recession was seeing arise in "revenue dilution fraud" where managers set up companies withincompanies or divert lucrative contracts away from their own companies to thirdparties.

He said there was also a rise in insider dealing.

"We have combination of political pressure and the understandable desire, ina downturn, for the public sector and corporates to be seen to have a zerotolerance policy. We are therefore likely to see increasing regulatory action."

Bevan expects an increasingly robust response from regulators. He added thatthere was anecdotal evidence that law firms were beginning to hire specialistsin market abuse.

The research also revealed that the average fraud is now almost 6m, a risefrom the 5m of last year.

Bevan added: "Fraud is as prevalent now as it has even been and companiesneed to turn the vigilance screm up a couple more notches in recessionary times."

Around 16% of reported fraud has its origins with internal management while17% begins with third party customers and suppliers. Almost half of all fraud iscommitted in the finance and insurance sectors.

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