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Fraud At Record Levels, New BDO Report Says

by Jason Gorringe, Tax-News.com, London

16 January 2018


BDO, the accountancy and business advisory firm, has released a report into the rapidly growing issue businesses and governments face with fraud, including tax fraud.

According to a report from the firm, loss to reported fraud is at its highest level in 15 years, with fraud costing taxpayers GBP2.11bn in 2017, up 538 percent on 2003 and 6.5 percent on 2016 levels.

According to BDO, fraud in the financial services sector increased dramatically in 2017, rising 318 percent in value, to just under GBP900m.

The firm pointed out that, in contrast, public administration fraud saw a 73.2 percent drop in value to GBP368.5m from GBP1.37bn in 2016, stating that this was due in large part, however, to the absence of a single GBP1bn VAT carousel fraud case that occurred in 2016.

"While a significant amount of fraud still goes unreported, our research suggests that people are becoming a lot more courageous in coming forward to report it and recovering their assets through the criminal or civil justice systems, said Kaley Crossthwaite, Partner and Head of Fraud at BDO. "There is now an expectation that fraud will be reported and investigated, both internally by corporations, charities, public sector entities, and companies operating within regulated sectors."

According to BDO, London and the South East remained the biggest hotspot for fraud in the UK in 2017, with the number of cases up by almost 30 percent to 176. Two of the biggest frauds in this area involved a family of VAT scammers who stole GBP45m from taxpayers, and a complex GBP121m scam where two city traders were said to have used sophisticated means to defraud a Russian bank.

Meanwhile, the average value of fraud in the North West has increased by 255 percent to GBP1.68m, with tax fraud accounting for more than 56 percent of the total value of all reported cases in the region.

According to the BDO report, in 2017, there were a number of instances where celebrity endorsements have been used to lend credibility to scams, as well as cases where celebrities have either been victims of fraud or - in the case of a former rugby star from Richmond - part of the defrauding process itself. One of the biggest celebrity-related frauds, said BDO, was a GBP100m tax scam in which 730 celebrities, including comedians, sports stars, and relatives of politicians, were conned into believing they were investing in cutting-edge research and development reforestation projects in Brazil and China.

Crossthwaite said: "There is a common misconception that you will be able to spot a fraudster – you can't. Our research shows that anyone can be a victim, including celebrities, rich, and poor alike."

TAGS: Russia | tax | business | value added tax (VAT) | public sector | accounting | financial services | China | Brazil | charities | trade | services | research and development

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