Fraud vulnerabilities and the global financial crisis

This paper examines the evidence on what is likely to happen to the incidence of different types of fraud in the context of the Global Financial Crisis (GFC), whether as a result of that crisis or because of other factors that coincided with it. Normally, statistical trends enable determination of whether a problem is getting better or worse. However, despite new mechanisms developed to improve fraud statistics in Australia, these cannot be applied retrospectively to past data (especially since the last serious recession was almost 2 decades ago and the last comparable GFC was in the 1930s); and fairly comprehensive Australian cost of fraud data are currently available only for one year and therefore cannot be used to show trends in the cost of fraud (Smith 1997; see also Smith & Budd 2010). In the United Kingdom, the National Fraud Authority (NFA 2010b) has begun to collect cost of fraud data from year to year as a follow up to the report to the Association of Chief Police Officers that provided an estimate of the cost of fraud in the United Kingdom in 2005 of £13.9b (Levi et al. 2007). However, longer term cost data are currently available in the United Kingdom only for payment card frauds (FFA UK 2010), some aspects of identity frauds (CIFAS 2009) and for some frauds against government departments (NFA 2010a). Except for consumer fraud data in North America and consultancy reports of variable quality (Levi & Burrows 2008), fraud data elsewhere in the world are too poor and/or intermittent to provide an adequate basis for knowing whether fraud is rising or if more of the ‘dark figure’ of undetected fraud has been discovered. Even useful periodic trend reports, such as KPMG’s (2011a) Fraud Barometer Reports mix together high-value frauds that actually occurred at a range of different periods because there are different elapsed times from occurrence to court.