In the latest edition of its annual Fraud Barometer KPMG identifies the fraud trends and patterns affecting the UK economy that helps us understand the risk mitigation response that organisation should take.
Start with what is right rather than what is acceptable
The Fraud Barometer considers the major fraud cases being heard in the UK Crown Courts where charges are in excess of £100,000.
TRENDS AND PATTERNS
There are a number of significant trends and patterns identified in their latest findings, however I'd like to focus on 3 key points. Firstly, that fraud by value has reached £1 billion even though the annual number of cases has reduced.
Secondly, the insider fraud has more than doubled to £46 million. This risk is reinforced further in previous global assessments by Kroll in its Global Fraud and Risk Report outlining incidents that significantly affected organisations, the insider threat in leaks of information and insider fraud were key areas.
The third area of significance is that procurement fraud increased six fold to £16 million. In its Annual Fraud Indicator 2017 in its assessment of the cost of fraud on the UK economy it estimated that procurement fraud equates to a staggering £121.4 billion. These figures highlight that there is a clear disparity between what is assessed as the risk and what is being prosecuted. So why is there such a significant gap.
NATIONAL STRATEGY
In its latest Economic Crime Plan it appears that apart from mentioning bribery by UK contractors in the overseas development sector there is no mention of procurement fraud. The UK highlights one of its strategic priorities 'is to develop a better understanding of the threat posed by economic crime and our performance in combating economic crime'. The Cabinet Office to progress this strategic action is working with government bodies and arms-length bodies to help them continue to develop fraud risk assessments to meet the Counter Fraud Functional Standards.
Thankfully in its year 2 anti-corruption strategy the UK has outlined a number of steps that it is taking to mitigate bribery and corruption risk that includes within procurement. Part of the focus has been within local government contracting and greater procurement transparency, however what appears clear is that there is an inconsistent approach to procurement standards and procurement fraud and corruption risk.
There is also an apparent lack of understanding and significance placed around procurement fraud and although the number of cases has increased, considering the billions that are spent annually by Government, public sector and local government organisation the response appears to be inadequate and doesn't appear to be part of the national discussion.
RISK ASSESSMENT
Approach to risk assessment and analysis is an important part of any risk mitigation strategy and response, however do individuals and departments that are conducting the assessments understand the procurement fraud typologies and methodologies within the various sectors.
Do the people whose role it is to run national procurement systems understanding what procurement fraud is and how it can be committed within their area of business or organisation. How can we conduct an assessment around procurement fraud risk if no one knows what procurement fraud looks like and if it was being committed, how would they know.
As part of a national strategy, training and awareness must be an integral part of national risk assessment. Only then would we be able to measure whether the procurement fraud and corruption risk framework that we have in place is adequate to mitigate the risk and additionally does awareness of procurement fraud increase the number of suspicion reports.
Only through staff knowledge of procurement fraud and corruption risk, how it is committed and areas of an organisation that can be targeted by internal external threats can we introduce adequate fraud and corruption prevention and detection.
So what do you think the UK Government's next steps should be to improve its understanding and response to procurement fraud?