Responding to COVID-19: insight, support and guidance
Today the CIPFA Counter Fraud Centre and Moore Stephens, the top ten accountancy firm, are launching a Global Fraud Risk Register.
The Register is based on a global survey of over 150 accountancy and fraud risk professionals across 37 countries to gauge the most serious at-risk areas across the globe.
Respondents considered 18 different types of fraud and bribery risk, scoring them from 1 (lowest risk) to 5 (highest risk).
The survey identified misspending of government funding as the top fraud risk area, with almost half (48%) of those surveyed saying that grant fraud posed a high or very high risk.
Grant fraud is where individuals, businesses or charities apply for and receive money they are either not eligible for, or when eligible funds are then spent on activities that were not included in the conditions of the grant.
These grants can include EU or UN funding for activities such as research or humanitarian projects.
One recent example of grant fraud is the case of a Cambridge historian, who claimed £223,000 from the Heritage Lottery Fund for a fictional archaeological scheme, but instead spent it on mortgage repayments and a new car, and was subsequently jailed for six years.
Money laundering is seen as the second highest risk, with 42% of respondents rating it as a high or very high risk, followed by payroll fraud third, with 41% giving it the highest risk ratings. These fraud areas have been ranked as higher risk than ‘hot topics’ such as cyber-crime and bribery.
In developed countries, grant fraud comes top of the list of concerns with 53% of respondents rating it as high or very high risk, followed by bribery (47% of respondents) and payroll fraud (46%).
For the UK specifically, grant fraud and payroll fraud are the top two risks, with 44% and 41% of respondents rating it as high or very high risk respectively.
John Baker, Director at Moore Stephens, commented: “Government grants are often seen as an easy fraud target.
“It may seem surprising to find Government grants eclipsing more ‘fashionable’ areas like cyber-crime when it comes to fraud risk. That said, it may be the case that areas such as cyber and bribery have been addressed more recently due to the high profiles, leaving more traditional areas unattended.
“Respondents in both developed and emerging economies seem to agree that funding bodies and donors should be focusing on doing more to tighten up their scrutiny of grant applications.
“If it wasn’t for whistle-blowers and financial auditors, many of these fraudulent schemes would go unnoticed and millions would be lost to fraud.”
Peter Wilson, Director of Counter Fraud at CIPFA, said: "The Global Fraud Risk Register is an important indicator of where public sector fraud teams should be focusing their efforts. Fraud is always evolving and, with the rise in the number of high profile cyber fraud cases, is getting more sophisticated, but it is important we do not overlook the more traditional types of fraud, such as grant fraud, which can sometimes be the most prevalent".
In emerging markets, 62% of respondents rated grant fraud at high risk. This is the same percentage of respondents who rated CEO/whale fraud (where fake emails purport to be from company bosses instructing payments to be made to fraudsters) as high risk.
The Register is an important indicator of where public sector fraud teams should be focusing their efforts.
It is also a valuable source of information for those conducting fraud risk assessments, updating risk registers and governance statements.
To view the Register, visit the Moore Stephens website.