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Portsmouth University Report On The Human Cost Of Fraud

University Of Portsmouth : 06 August, 2010  (Technical Article)
Counter Fraud Studies researchers at the University of Portsmouth have detailed the findings of a study into the financial and human costs of fraud
Researchers at the Centre for Counter Fraud Studies at the University of Portsmouth and chartered accountants and business advisers MacIntyre Hudson have interviewed victims of frauds ranging from those who had been sold a fake holiday to those who lost a lifetime's business and their entire pension pot.

While the types of fraud and amounts lost vary widely, the effects are almost uniform -- victims feel embarrassed and angry and most say they will never again trust people.

Mark Button, Director of the Centre for Counter Fraud Studies and a Reader at University of Portsmouth, said: 'Given the common assumption that fraud is a victimless crime and after publishing several reports illustrating the financial costs of it, we felt it was important to show the devastating impact upon ordinary people this crime can often have.'

Co-author Jim Gee, Director of Counter Fraud Services at MacIntyre Hudson and Chair of the Centre for Counter Fraud Studies, said: 'Fraud is a pernicious problem. Its costs are social, financial and personal. At a society-wide level it corrupts human interaction and undermines good behaviour; at an organisational level it undermines the financial health and stability of companies and public sector agencies which we rely on to enjoy a proper quality of life; and at a personal level it causes real damage to the health and wealth of those who are its victims. This report exposes that serious human cost.'

The Centre for Counter-Fraud Studies was commissioned to conduct research on fraud by the National Fraud Authority and the Association of Chief Police Officers. The researchers then decided to highlight the human cost of fraud -- the so-called victimless crime -- by collating the transcripts of interviews with victims.

Dr Button said: 'One of the striking myths about fraud is it has less impact than some other crimes. This is wrong -- fraud has a devastating impact on victims and their families.'

One victim, the owner of a small design business, said being targeted by a fraudster was like being stung by a mosquito then finding out you had malaria.

He is 59 years old and was within reach of retirement when a senior member of staff, hired to help him grow his business, defrauded his company and left him on the verge of bankruptcy.

He said: 'The woman who defrauded my company is pure gold-plated evil. She knew how to take us for everything. She was so good she effectively made the fraud vanish from the books, not even the receiver could bring her to account. The police said there was nothing they could do. She was untouchable.

'What she did was dreadful but it's even worse knowing she is still out there and she will be doing it to someone else now.

'For 14 months, I could not sleep for more than two hours at a time without waking up.

'My company was worth £650,000 when she started. Within just 14 weeks we were not even worth £35,000. It had all gone.

'The thing is, in business, if competitors or suppliers know you've been done over they circle like sharks, they smell blood in the water and they'll exploit your weaknesses. They see an opportunity and they'll withhold vital funds, for example.

'On a human scale, fraud smashes into your life and destroys it. My wife and I took 31 years building the reputation of our business and our name. In the end it was the only thing that saved us. One customer who knew us well took the risk of trusting us and gave us a single order. It was the only order we'd had for months and it saved us and allowed us to start rebuilding the company.

'Until you've been done over you don't have a clue. I don't trust anyone now.

'In business you sometimes take sensible, calculated risks. But the fact I didn't spot her evil work is frightening. You lose faith in your own ability, it's tragic. I used to always back my own people, I was a loyal employer and hoped they would repay that with loyalty. But this woman wanted to ruin me.

'I think what the Centre for Counter Fraud Studies is doing to highlight the real cost of fraud to individuals is really important if we are ever to change things in this country. Changing the tax system would be a start.

'Despite us being the victims of fraud, it is us who are disadvantaged. It is our name and reputation that is associated with failure in the marketplace, not the fraudster's name; it is our future business revenue which has been lost; we cannot get a business overdraft, we cannot get credit cards. This one incident of fraud has pushed us into over 75 per cent mortgage on our home as we approach retirement age.'

The Human Cost of Fraud report was written by Dr Button, Jim Gee, Chris Lewis and Jacki Tapley.

MacIntyre Hudson LLP and the Centre for Counter Fraud Studies have previously published three reports on the financial cost of fraud:

- The Financial Cost of Fraud in November 2009

- The Financial Cost of Healthcare Fraud in January 2010

- The Financial Cost of UK Public Sector Fraud in April 2010
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