Top fraud risk area is not cyber crime or money laundering, but misspending government money


Misspending government money was ranked as a high risk by 48 per cent of respondents (Source: Getty)

Misspending government funding tops the list of current fraud risk areas, ahead of cyber crime and money laundering, according to accountancy firm Moore Stephens and the Chartered Institute of Public Finance and Accountancy (CIPFA).

Almost half of accountants surveyed by Moore Stephens and CIPFA said grant fraud – where an individual, business or charity applies for money it is not eligible for, or spends it on activities not included in the conditions – poses a high or very high risk.

In one recent case, a Cambridge historian claimed £223,000 from the Heritage Lottery fund for a fictional archaeological scheme. He instead spent it on mortgage repayments and a new car, and was jailed for six years.

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“It may seem surprising to find government grants eclipsing more ‘fashionable’ areas like cyber crime when it comes to fraud risk,” said John Baker, a director at Moore Stephens.

“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.”

Grant fraud can include cases where the funding came from the EU or the United Nations, for activities such as research or humanitarian projects, and Moore Stephens has warned that there could be an increase in fraudulent applications for EU grants as Brexit threatens to close the door.

Money laundering was seen as the second highest risk internationally, with 42 per cent of respondents saying it was a high or very high risk, followed by payroll fraud. In the UK, payroll fraud ranked second.

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The top 10 fraud risks worldwide

Type of fraud Percentage of respondents scoring high or very high risk
Grants 48 per cent
Money laundering 42 per cent
Payroll fraud 41 per cent
False representation 40 per cent
Bribery 40 per cent
Bank mandate (when a direct debit is changed send money to a fraudster disguised as a regular payee) 39 per cent
Cyber crime 38 per cent
Misreporting results 37 per cent
"Whale fraud" (where finance staff receive a message asking to rush through a payment to a supplier) 37 per cent
Procurement fraud (receipt, evaluation and award fraud) 32 per cent

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