This Year’s Annual Fraud Indicator is… Erm, Different. Again!

OK so a few weeks ago the UK National Fraud Authority (NFA) finally released the Annual Fraud Indicator (AFI) for 2013. This is the annual report that attempts to quantify the overall cost of fraud to the UK economy and every year since the first report (2010) the quantity and quality of the estimate has changed and improved.

This Year’s Annual Fraud Indicator is… Erm, Different. Again! Why does the "top secret project" Prism have a logo?
This Year’s Annual Fraud Indicator is… Erm, Different. Again! Why does the “top secret project” Prism have a logo?

There was much less fanfare and noise surrounding this year’s report… I am not sure if this was intentional or whether it was simply drowned out by all the recent press coverage for the US CIA / NSA / Prism / Edward Snowden and the shock horror revelation that our secret services are actually reasonably good at spying. The fact that a “secret” project such Prism has its own logo has been a source of much amusement at recent #Infosec events (RANT comes to mind), as well as on national TV via programmes such as 10 O’Clock Live

This year I was rather hoping that we might be in a position to be able to make (within reason) a like for like comparison to the 2012 report. Alas this is not the case. From memory the headline figure from the 2012 AFI was £73b and this was a massive jump from £38b the year before. This jump was not due to a massive increase in fraud but due to more accurate measurement… well this year we have a headline figure of…(queue drum roll)… £52b. What? From £38b in 2011 to £73b in 2012 and now £52b, what is going on?

Well it would seem that perhaps there was some wildly over enthusiastic estimations and possible biased data in the 2012 report and so once again we have a revised methodology and no means to make a year on year comparison. “The AFI does not indicate whether fraud losses overall have increased or decreased. Rather it provides an indicative estimate of the potential scale of the problem nationally by drawing on a compendium of fraud loss estimates” says Stephen Harrison in his foreword.

This Year’s Annual Fraud Indicator is… Erm, Different. Again! NFI 2013: Identified Fraud Loss Estimates by Victim
This Year’s Annual Fraud Indicator is… Erm, Different. Again! NFI 2013: Identified Fraud Loss Estimates by Victim

I also think it is a little disappointing that this report does not give any indication as to how well the National Fraud Intelligence Bureau (NFIB) and Action Fraud are performing in terms of cases investigated. I always suggest to my clients that their measures should take into account not only the amount of fraud experienced but also the amount of fraud successfully detected or prevented. All too often I see fraud teams reduced and fraud risk controls reduced as “we no longer experience as much fraud” but of course as soon as the controls are relaxed then the fraud comes straight back again. Ho-hum, perhaps we will more results data from the NFIB and Action Fraud in the future but I am not going to hold my breath.

Anyway here are a few figures from this year’s AFI:

  • Private Sector: Participants estimated that, on average, fraud losses as a proportion of turnover could be in the region of 0.54 per cent, with 0.18 per cent lost to detected fraud and 0.36 per cent lost to hidden or undetected fraud. This is approximately equivalent to £15.9 billion per annum.
  • Charity Sector: Fraud against the charity sector is estimated to cost registered charities across Great Britain £147.3 million. In all, 1,599 registered charities with an income over £100,000 responded to the third consecutive survey of the charities sector
  • Individuals: The NFA estimates fraud against individuals in the UK to equate to a loss of £9.1 billion per annum, based on estimates of the scale of mass-marketing fraud, identity fraud, online ticket fraud, private rental property fraud and electricity prepayment meter scams.
    • According to ONS, the UK adult population is 49.1 million with an average income per head per household of £17,993 per annum. By applying the estimated fraud loss for individuals of £9.1 billion to the total income of the UK population, it is estimated that 1.03% of the UK adult population’s income is lost to fraud
  • Payroll fraud comprises 9.3 per cent of occupational fraud with a median loss of £29,863 per payroll fraud case.

Coming in at 68 pages, the report is quite detailed, but as with all reports of this nature you do need to take it with a pinch of salt. One thing that is useful for those who are mad on stats is that the report references a bucket load of other reports and studies such as “The Nature, Extent and Economic Impact of Fraud in the UK” by Michael Levi and co at Cardiff University, and “Fraud and Error in the Benefits System” from the DWP.

This Year’s Annual Fraud Indicator is… Erm, Different. Again! NFI 2013: Hidden Fraud Loss Estimates by Victim
This Year’s Annual Fraud Indicator is… Erm, Different. Again! NFI 2013: Hidden Fraud Loss Estimates by Victim

What Do You Think?

I am curious to get some thoughts and feedback on this year’s NFI. I will be giving my thoughts and opening up a discussion on this report at the next P&A Fraud Prevention Forum which will be held in Birmingham on 11th July. If you would like to join us at this event then do please get in touch with me via email or twitter, or contact the forum team directly.

The agenda for the event is as follows:

  • 09.30. Arrival & Coffee
  • 10.00. The current Fraud Picture
    • A look at the current stats and what are they telling us. Darren Hodder, Fraud Consulting & Laurie Beagle, P&A Receivables
  • 10.30.  Credit Reference Agencies
    • Spotting the fraudster, Simi Bains, D&B
  • 11.15.  Break
  • 11.30.  Sharing “members” experiences
    • Workshop
  • 12.15.  Tracing
    • Tracing people and assets. Jamie Matthewson, GPB Solicitors LLP
  • 13.00.  Lunch
  • 13.45.  Engaging the rest of the business
    • How to get the Prevention message across the business. If you are attacked, hopefully unsuccessfully, how to identify process gaps, what can be learnt and how to communicate. Darren Hodder, Fraud Consulting
  • 14.30.  Develop the “perfect” Fraud
    • Workshop. In teams develop the perfect fraud. Then see if your defences are strong enough.
  • 15.15.  Wrap up & Close

I look forward to hopefully seeing some new faces at this event as well as “The Usual Suspects”

D.

About Darren Hodder

Darren HodderDarren is the director of Fraud Consulting Ltd, which was incorporated in July 2009 to provide vendor neutral fraud consultancy services to clients covering financial services, banking, telecommunications and insurance industries, both in the UK and internationally.

His experience ranges from working on single portfolio in-house solutions through to national fraud bureaux and data sharing initiatives. Prior to his current position Darren worked for Experian Decision Analytics (EDA) where he held various roles within the Fraud & Identity Solutions and Global Technology groups over a 10 year period.

Darren is an active member of the Fraud Advisory Panel, IAFCI and the ACFE. He is also a member of the editorial board for E-Finance & Payments Law & Policy published by Cecile Park Publishing.

Follow Darren on twitter: @FraudAssist