The Cost Of Living Crisis Will Increase Fraud

Fraud is on the increase. A new report from the Chartered Institute of Internal Auditors (CIIA) agrees, saying that the Covid19 pandemic has placed considerable financial and operational pressure on businesses over the past 2 years. The cost-of-living crisis will only contribute to the number of fraud cases we are likely to see, as financial pressures on individuals and businesses increase.

What is fraud?

Action Fraud say a fraud has taken place “when trickery is used to gain a dishonest advantage, which is often financial, over another person.” People commit fraud to make money, obtain goods or a service, or to avoid paying for goods or a service. Common types of fraud include cybercrime, insurance fraud, mortgage or benefit fraud. A 2019 report estimated the cost to the UK economy was between £130bn and £190bn a year.

A perfect storm

We have already seen a spike in the number of couples getting into matrimonial difficulties because of financial issues. And there is much evidence to support the fact that when the UK economy struggles, fraud increases.

Inflationary pressures are already driving up wages. In turn, employers are having to make job losses, whether they be part-time or full-time roles, because their businesses cannot sustain the increased wage costs.

With so many households impacted by inflation and the cost of living, individuals may become more desperate and turn to fraud as a misguided solution. Or, indeed, they may find themselves the victim of a clever online scam, tricked into transferring money into a fake investment or paying for non-existent products. If an opportunity looks too good to be true, it probably is!

Fraud prevention is better than cure

The Action Fraud website has advice for individuals and businesses. Their advice is to identify where you may be at risk from fraud. For businesses, this means knowing your customers, employees, suppliers and assets. The CIIA report recommends carrying out regular fraud risk assessments, to frequently review the ‘fraud triangle’ (motivation, opportunity and rationalisation) to help anticipate fraud and also to be prepared for more scrutiny from the government, regulators and the public.

Authorities need to be alert and the Government needs to provide the resources to prevent and combat this major increase in fraud that is coming down the tracks.

Forensic Accounting specialists

At Davidsons Forensic Accountants, we are instructed by solicitors, barristers and businesses in relation to fraud investigations, including benefit, mortgage, director and employee fraud. If you would like to discuss a case, please contact us.