Frauds ate up 16 bn pounds last year, says study

Frauds ate up 16 bn pounds last year, says study

	Published : Thu, 24 Nov 2005 14:05 By : David Simms Print this Story

LONDON: Frauds cost the country as much as 16 billion pounds in 2004, according to calculations by insurer Norwich Union. This is equivalent of 1.4 per cent of the GDP and it has risen by more than 15 per cent in the past five years, a study by the insurer revealed.

Norwich Union covered more than a dozen statistical sources and brought out details to show that the bulk of the frauds happened in the public sector, with benefit, customs and tax sectors accounting for the largest proportion. While the benefit sector had some 5 billion pounds worth of fraud, customs and tax sector accounted for 2.8 billion pounds and 2.1 billion pounds respectively.

The author of the report, Chris Hill, who heads the fraud unit at Norwich Union, said frauds worth 10 billion pounds happened in the public sector, while 4 billion pounds took place in the private sector. The rest accounts for indirect costs involved.

In the private sector, insurance fraud accounted for 1.5 billion pounds. Hill says serial claimants are common today with fraudsters becoming increasingly sophisticated. Stage managed car accidents are just an example of such frauds, and Hill quotes the instance of one person putting in as many as 103 accident-related claims in a year.

Credit card frauds totalled 500 million pounds in a year, he added.

Hill said fraud appears to have become main source of income for organised criminals in the country, even overtaking drug peddling. People who are at the heart of the frauds are not those working alongside the drug traffickers; they are the drug traffickers themselves.

He said much of the proceeds of frauds do not come back to the economy. "There is also a major inflationary pressure here. The costs of goods and services inevitably are priced to factor in whatever losses companies are sustaining on fraud. This is not a victimless crime. The cost of fraud is borne by the public," he wrote in the report.

Hill is of the view that the government should set up a national commission to devise a strategy for tackling the problem.

There is police inaction that adds to the problem. In the case of Norwich Union, it had detected 4,000 clear cut cases of fraud against itself last year and presented them with solid evidence to the police, but the police presented the authorities with only 41 of these cases -- so called "super-frauds" involving public interest or organised crime. Of these cases, only 18 were taken to court, although all the prosecutions were in fact successful. Fewer than half of these cases led to prison sentences.

Hill says many of the U.K. insurance firms and many banks now just do not report the frauds.