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Fraud costs the UK economy billions each year. How can accountants better protect their clients?

Fraud is estimated to cost the UK economy £219 billion a year, highlighting the need for strong counter measures. Arun Chauhan, founder and director of Tenet Compliance & Litigation, examines why people break the rules and helps businesses understand the risks, red flags and best practices at the Institute of Financial Accountants’ (IFA) International Conference Online on 7 November.

by | 23 Oct, 2024

A customer hands a shop assistant their bank card

Fraud has emerged as a key challenge amid the prevalence of digital transactions and online businesses. The latest Annual Fraud Indicator (AFI) 2023 report reveals it amounts to a £219 billion annual cost to the nation’s economy. However, recent data from UK Finance’s Annual Fraud Report 2024 shows some positive trends.

The AFI 2023 accountancy firm Crowe UK, solicitors Peters & Peter and the University of Portsmouth breaks down the losses across various sectors:

  • Private sector: £157.8 billion
  • Public sector: £50.2 billion
  • Frauds against individuals: £8.3 billion

These figures represent a significant increase from the 2017 report and reinforce the growing sophistication of fraudulent activities.

However, there have also been improvements in actions to tackle fraud, according to UK Finance’s Annual Fraud Report 2024:

  • Total fraud losses in 2023: £1.17 billion (down 4 per cent from 2022)
  • Confirmed fraud cases: 2.97 million (down 1 per cent from 2022)
  • Unauthorised fraud prevented: £1.2 billion (up 7 per cent from 2022)

Close up of Arun Chauhan
Arun Chauhan, Founder and Director of Tenet Compliance & Litigation

Arun Chauhan, founder and director of Tenet Compliance & Litigation, believes anonymity and the lack of inhibition in online environments fuels fraudulent activity. “In the past 10 years, business and individual consumers have been driven to operate their lives and business through online platforms,” he says. 

The UK Finance report reflects this shift, with card ID theft losses increasing by 53 per cent compared to 2022, and 200 per cent compared to 2021. Mobile banking fraud cases increased by 62 per cent, surpassing web banking cases for the first time.

Chauhan, who is also Trustee Director for the Fraud Advisory Panel, specialises in complex disputes, investigations and compliance regulatory issues arising from fraud and financial crime. He has provided evidence to a House of Lords Select Committee about the effectiveness of prosecution for fraud offences and the impact of digital fraud risk, and regularly comments on customer fraud issues in the banking sector.

Five issues have emerged, Chauhan says, that have fuelled the rise in fraud:

  1. The online environment is a “fraudsters’ playground as it provides for anonymity of criminals or businesses involved in sharp practice”.  
  2. There is less of an inhibition to defrauding a business partner or consumer victim if there is no physical proximity between the fraudster and the victim. 
  3. Our personal data is the new currency for fraudsters as it allows for impersonation of you or your business, to divert goods, payments or to take out credit or loans in your name.   
  4. The use of data in an online environment has triggered impersonation of websites, companies and people “leading back to the risk of being duped into a transaction with someone who is not who they say they are”.  
  5. The “gateway to cause damage is through electronic communications where we need our people to be our human firewall to help us avoid cyber attacks”.  

Accountants play a pivotal role in fraud prevention and detection

Accountants “play a pivotal role as watchdogs in detecting and deterring fraud, as well as helping clients navigate a situation when they suspect or ask help to investigate fraud,” Chauhan says. 

At the IFA’s International Conference Online, he will explore the extent to which accountants need to assess director supplied information and ensure accuracy and integrity in financial reporting. 

“In the event fraud is suspected, swift and decisive action is essential,” he says. 

“Fraud is the most commonly experienced crime in the UK, accounting for over 40 per cent of all crime and [constitutes] a constant threat to businesses. This means it is likely almost half of your clients might at some stage be impacted and you are likely to be the first port of call.”

There are many differing reasons people commit fraud. 

“There are opportunistic fraudsters playing the numbers game to see who they can catch,” Chauhan says. 

These range from organised crime gangs looking to infiltrate your business, trusted bookkeepers who siphon business funds, suppliers that deliberately overcharge, and co-directors or shareholders who look to divert business opportunities to compete.

“No case is the same and learning to think about fraud as a risk in day-to-day business life is now a necessity for any accountant,” he says.

The hectic pace of work and a lack of policies, procedures and controls can make small businesses vulnerable to fraud. 

“The reality is that small businesses are targeted with what might be seen as game-changing opportunities to save or make money and the pressure of doing well, causing people to make decisions without seeing the risks of fraud,” Chauhan says. 

Fraud prevention measures 

How can small businesses protect themselves? 

“Having even simple controls around segregation of duties and spot checks are important, especially in finance and procurement, as these are two of the most vulnerable areas for small businesses. Make sure your people are your eyes and ears, and that they have talked about and understood what fraud actually is in the context of their business, so they know what to look out for.”

Chauhan advises accountants to help their clients better understand that fraud is a critical business risk and how it can impact their business.    

“The second step is knowing what to do if a client says they are worried about some form of fraud in the business,” he says. 

There are several things to keep in mind, Chauhan says:

  • Gathering the facts covertly before confronting the alleged perpetrator
  • Considering when to trigger any relevant insurance coverage
  • Understanding the possible options for recovering

“Ideally, knowing where to find legal support for when a client raises the concern is crucial,” Chauhan says.

Sector challenges

Procurement fraud in the private sector is estimated at £133.6 billion, and is on the rise in the public sector, increasing 25 per cent since 2017 to £50.2 billion. Central government taxation fraud accounts for £18.2 billion of these losses, underscoring the need for effective tax collection and enforcement measures.

UK Finance says the financial services sector is at the forefront of combating economic crime. It estimates £1.2 billion of unauthorised fraud was prevented in 2023, up 7 per cent from the previous year. That same year, the Dedicated Card and Payment Crime Unit saved over £33 million and secured 68 convictions in 2023. The Banking Protocol rapid response scheme has prevented £312.9 million in fraud since its launch in 2016.

Chauhan advocates a multi-pronged approach to fraud prevention that combines technological solutions with human vigilance and regulatory frameworks. 

The upcoming ‘failure to prevent fraud’ offence, set to be introduced in 2025 as part of the Economic Crime and Corporate Transparency Act, initially applies only to large companies. Extending its scope to smaller businesses could bolster standards across the board.


The Institute of Financial Accountants’ International Conference Online is on 7 November. 

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