Midlands Doing Well . . . at Fraud; John Sedgwick, Special Correspondent, Looks at the Balance between Ethics and Temptation

The Birmingham Post (England), March 25, 2008 | Go to article overview

Midlands Doing Well . . . at Fraud; John Sedgwick, Special Correspondent, Looks at the Balance between Ethics and Temptation


Byline: John Sedgwick

In spite of strengthened regulations and greater investment by companies in control structures, cases of business fraud incorporating everything from theft to more complex management corruption are posing an increasing threat to ethics in the workplace.

The pounds 3.6 billion loss reported at Societe Generale has highlighted financial fraud at the highest end of the scale, but business crime covers a vast array of issues and is becoming increasingly commonplace.

According to the biennial 2007 PricewaterhouseCoopers global economic crime survey only 17 per cent of companies questioned believed they would be victims of fraud, yet 48 per cent can expect to be hit by some sort of economic crime.

BDO Stoy Hayward's 2007 FraudTrack research shows an overall increase in reported fraud of 153 per cent since the first survey in 2003, from pounds 411 million to pounds 1.04 billion and analysts predict that with companies feeling the squeeze of an increasingly tough business climate in 2008 they are more likely to be tempted to stray to the wrong side of the law.

The Midlands did not perform particularly well in the latest FraudTrack research which showed the region to be engaging in business fraud to the tune of pounds 320 million, amounting to 32 per cent of total fraud in the UK. Only London and the South East, the centre of the financial services industry, had a higher proportion at 34 per cent, or pounds 340 million.

VAT fraud has seen the biggest growth in recent years, developing to incorporate crimes involving bogus anti-terrorist certificates, tax rebates, export clearance and even the crime of offering compensation to fraud victims. Carousel fraud where firms dodge VAT payments presents a substantial amount of the value of organised fraud and identity fraud also continues to be a big problem.

The Financial Services Authority which handles fraud within the financial services industry and works in tandem with the Serious Fraud Office, the police and the Serious Organised Crime Agency launched its first criminal prosecution for insider trading in January this year.

There are no exact figures on the cost of insider trading but it is estimated that almost a quarter of share trades around company announcements involve buyers acting on information. Distinguishing whether a buyer is simply acting legitimately on a broker's recommendation or acting on insider information that is not available to the wider market becomes the real problem.

There are numerous organisations working to reduce fraud and crimes in business by promoting good business ethics for individuals and companies.

The Securities & Investment Institute is a training, examining and membership organisation for the sector. …

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