The Government's various "wars" against drugs, street attacks and burglary attract all the attention. However, just as important - in the view of significant sections of the business community - is the battle against fraud. But this is a campaign that has barely started. Big cases, such as the Barings and Maxwell affairs, grab the headlines, but they are only the tip of the iceberg.
The total economic cost of fraud was put at pounds 13.8bn a year in a report produced for the Home Office by National Economic Research Associates (NERA) in late 2000. NERA believes this figure is likely to be an underestimate and has pointed to 1999 figures from the Association of British Insurers suggesting that fraud was costing pounds 16bn a year (or pounds 650 for every household in the country) as "not outside the bounds of possibility".
Such figures indicate that this is a problem big enough to require serious attention. And yet those involved in combating it consistently complain of a lack of resources. Ken Farrow, head of the City of London Police Fraud Squad, told an Institute of Chartered Accountants in England and Wales conference on fraud last month that there were only 500 to 600 police fraud investigators dedicated to tackling economic crime in the UK and that at any given time half of these may have been diverted to dealing with other serious crimes. While the City Fraud Squad treats all fraud cases as a priority, the Serious Fraud Office handles only 80 to 100 of the most serious cases, generally those involving more than pounds 750,000.
The ramifications of this are serious for all businesses, but they are especially so for small and medium-sized enterprises (SMEs). As David Alexander, Birmingham-based fraud investigation partner with the forensic arm of the accountancy firm KPMG, points out, a fraud does not have to be particularly large to cause a business severe difficulties. "Relatively small frauds can take a company down," he says. Guidelines issued by the Fraud Advisory Panel, an independent body supported by the Institute of Chartered Accountants with the aim of developing an integrated approach to countering fraud, emphasise that SMEs are at as great a risk from "cybercrime" as large multinationals.
Cybercrime takes various forms: hacking, which can be carried out by outsiders as well as insiders and for purposes ranging from disruption and embarrassment to theft of information or assets; "netspionage", or stealing business secrets; and credit card fraud, which is currently reckoned to cost the UK economy pounds 400m a year and is expected to reach pounds 600m a year by 2005.
Steven Philippsohn, of the law firm Philippsohn Crawfords Berwald, is a longstanding expert on fraud and chairman of the Fraud Advisory Panel's cybercrime working party. He points out that, while the rise of e-commerce has led to a sharp increase in fraud, SMEs need to realise that they are at as much risk from insiders as from outsiders. …