Welcome to the latest issue of The Anti-Fraud Network Newsletter:

Letter from the Editor, April 2014

 

Nick Burkill

Welcome to the April issue of the AFN newsletter.

In this issue, we are pleased to include an extract from Fraud: The Counter Fraud Practitioner’s Handbook, published by AFN partner Gower Publishing. We hope the extract will spark a debate as to whether the predictions of the 2009 Ernst & Young survey have come true. Please join the debate on our Linkedin page.

 

In This Issue:

Extract taken from Fraud: The Counter Fraud Practitioner’s Handbook, edited by Alan Doig

Fraud-TheCounterFraudPractitionersHandbook

 

 

 

 

 


Future Trends in Fraud

A pan-European study of 2,246 employees by Ernst & Young (2009) found that 55 per cent of respondents expected corporate fraud to increase over the next few years: a third because changes to their business opened up new areas of risk; 31 per cent because management were not focused on anti-fraud measures; 29 per cent because they didn’t trust management and an equal number because pressures to protect the future of the company will be greater. East Europeans were particularly sceptical about their own management.

Over a third of respondents mentioned that normal controls were likely to be forgotten or overlooked during cycles of redundancies, especially when linked to merger activity which could easily lead to disorganization and low morale. When asked whether activities would be justified if they help a business survive the economic downturn (a form of ‘noble cause corruption’), a quarter found it justifiable to make cash payments or give personal presents to win or retain business; a fifth to provide ‘entertainment’ to win or retain business; and a twelfth to misstate the company’s performance. Only two fifths said that it was unjustifiable to commit corruption or fraud under such circumstances. Stock-exchange listed companies differed little from others. Opportunity, culture and the expectations about others’ behaviour are so central to the propensity to defraud that one must be wary of automatic assumptions about international transferability. However, the Internet is to some extent a leveller of transnational crime opportunities, creating many more chances for technically savvy people in otherwise low-opportunity countries (see also KPMG 2009; Kroll 2010; and PWC 2009 for parallel fraud surveys, with different samples and orientations).

Fraud, like the value of investments, can go down as well as up. But fraud – like many other crimes – is not a unitary ‘thing’ but consists of many different sorts of harm which are likely to be driven by different factors, including what we do to prevent them and prosecute them. Whereas Levi et al. (2007) were asked merely to review the scientific adequacy of existing data, the National Fraud Authority (2010) has been able to stimulate a broader range of bodies to collect and divulge data about fraud during the period covered. But it is a mistake to think that there is a ‘true figure of fraud’: there will always be frauds that are unrecognized as such by victims and third parties, and even where something is recognized as a suspicious loss, the amount of it that can properly be attributed to intentional or reckless dishonesty may be a legitimate area of dispute.

A rise in crime rates can be an indication that the quality of life has got worse, but in this case, the substantially greater cost-of-fraud figure is far more likely to reflect improved knowledge than a real rise. Indeed, on a strict like-for-like comparison of items included in both reports, there has been a slight fall of 3.47 per cent since 2005 in the costs of fraud. Thanks to improved controls rather than improved social morality, Missing Trader Intra-Community and social security frauds have gone down substantially, while in the private sector, insurance, online banking, payment card and telecoms frauds have gone up; and in the public sector, NHS patient frauds and frauds against the BBC have gone up. Other than for payment card, cheque and some identity frauds – where the data are more reliable (and are thoughtfully reviewed in CIFAS 2010b) – we cannot know without further work whether these changes reflect better analytical skills in fraud detection by victims or real changes in fraud. But we should appreciate that any given sector of fraud risk consists of the interaction between motivation, criminal ingenuity and the opportunities that we give criminals by the way potential victims and ‘third party guardians’ watch over our assets and intervene (or otherwise). All three of these can change over time.

Though there remain areas of fraud against individuals, business and government that need greater understanding of risks, the UK government has made a more sustained effort than have other countries to measure the direct costs of fraud in private, public and not-for-profit sectors, and we are beginning to understand a little more about the impacts that these costs have upon our businesses, citizens, external investors, public services and visitors, which are not included in these financial totals. Measurement is only the beginning, for the process of analysis should stimulate us to reflect on what we can do about our vulnerabilities, and what we need from ourselves and from others to tackle them better. We do not know precisely how much displacement of fraud to other crimes and countries occurs, but it is easiest to cut out the opportunists: the determined will seek out alternative sources of profit, via social engineering and/or technical means, and will try to migrate to other frauds. In a climate of private and public sector spending cuts, there is a risk that we may lose sight of the harm that frauds can do and the importance of both individual and collective effort in reducing them.

Fraud: The Counter Fraud Practitioner’s Handbook is published by AFN partner Gower Publishing. Gower offers AFN members and newsletter recipients a special 30% discount on the list price of their anti-fraud book titles. Simply click here and, once you have made your choice, go to the online checkout and enter G8ATZ30 into the field marked “Leaflet Code.” Your order will be processed with a 30% discount.

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The Anti-Fraud Network is a network of professionals who specialise in the prevention and investigation of fraud and white collar crime, and the pursuit of claims arising out of the theft or other dishonest appropriation of assets, corruption, misuse of confidential information or similar breaches of duty. Recovering the proceeds of fraud and corruption is one of the truly global problems facing organisations today. Proceeds rarely stay in the country where they have been stolen. For organisations to recover stolen or corrupt assets they need access to lawyers and professionals specialising in their recovery across the world.

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The Anti-Fraud Network has been Highly Commended by the Financial Times in the 2008 FT Innovative Lawyers Awards Report

UK Bribery Act Interview

Award

Chambers and Partners LogoNicholas Burkill of Dorsey & Whitney is an expert in bribery and corruption matters, and is widely considered by sources to be an authority on the implications of the new Bribery Act. Sources describe Burkill as “extremely personable, very bright, client-focused and always looking for the best commercial solutions.”

Chambers 2011

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The Legal 500 - United KingdomThe Dorsey team is an excellent choice for tax and fraud disputes, and group head Nicholas Burkill is ‘an enormously experienced fraud litigator, with great depth of knowledge; intelligent and hardworking, with an excellent sense of humour. One of the best around’.

Legal 500 2010

Dorsey & Whitney’s practice head Nicholas Burkill is a ‘cool-headed and determined litigator’.

Legal 500 2011