Fraud cases rise in region, says BDO report

CROOKS who pose as customers or suppliers are preying on many Yorkshire businesses, according to a new survey.


The Fraud Track research compiled by accountancy and business advisory firm BDO shows that many Yorkshire firms are still failing to protect themselves from criminals who could destroy their business. In many cases, the perpetrators are trusted employees with unblemished records.

The survey found that the volume of reported fraud across Yorkshire increased over the last year.

Third party fraud, which is committed through firms’ suppliers and customers, now accounts for half of the total stolen from Yorkshire firms through fraud, the survey said.

BDO’s 2014 analysis, which examines reported fraud cases with losses of more than £50,000, found that the number of cases in Yorkshire last year rose to 56 from 52 in 2013.

Corporate fraudsters who pose as legitimate customers, suppliers or other third parties caused a big problem for companies this year, indicating the need for firms to tighten up their systems and controls, BDO said.

One example cited by BDO in its report is a £15m advertising scam which was carried out by an East Yorkshire man, who defrauded companies with a small business directory website. He sold advertising space under false claims for ‘guaranteed business’ and locked clients into long-term contracts.

Other fraud cases last year included a £3.5m money laundering scam by Bradford-based doctors, who set up a series of fake companies to launder criminal money and transfer it abroad.

Despite the increase in the number of reported fraud cases, the combined value of fraud in the region dropped from £53m in 2013 to £49.5m. This is slightly less than the North West’s total of £50.2m, which has the highest level of fraud outside London and the South East.

Adam Smith, forensic director at BDO in Yorkshire, said yesterday: “One of the reasons we are seeing a drop in values, despite the increase in volume, is due to a growing trend for high value complex fraud being dealt with outside the judicial system and out of the public eye.

“Companies are increasingly assessing the reputational cost of a public case to their business, with many preferring to deal with perpetrators through civil – not criminal - remedies.”

Mr Smith said that many companies were still “very nervous” about attracting bad publicity, because they were concerned about how their customers, suppliers and the bank would react. As a result, many firms did not welcome a police investigation.

According to Mr Smith, a lot of the frauds were not particularly complex, and were carried out by people who had “unfettered” access to a company’s bank account.

He added: “It’s always the person you trust the most, who can rip you off the most.”

In an age of instant communication, Mr Smith is concerned that too many businesses are not carrying out due diligence.

Leeds has the region’s worst fraud record, with the city accounting for more than a third of all reported cases in Yorkshire.

The finance and insurance sector suffered the most from fraudulent activity in the region, with £5.7m worth of activity, followed closely by public administration (£5.2m).

The report found that the total value of UK fraud in 2014 was £720m. This is down 31 per cent on the previous year, and it is also the lowest value since the reports began in 2003.

However the number of cases rose to a record 546, from 525 in 2013, with the average value of fraud falling - from £3.3m in 2012 to £2m in 2013 and £1.3m in 2014.

The report found that 402 of the 546 cases had a value of £500,000 or less.