The majority of the scams targeting consumers are happening on social media, according to a new report.
ADVERTISEMENTFraud in the UK more than doubled in value in 2023 compared to the previous year, according to financial services firm BDO.
The firm's latest FraudTrack analysis shows that the total reported value of fraud in the UK reached a whopping £2.3 billion (€2.69 billion) last year.
It works out at a 104% increase on 2022, although BDO notes that the huge rise is mainly due to a few high-value cases.
The £2.3 billion sum is approximately the total lifetime earnings of some 1,645 people (assuming they received the current UK median salary for 40 years), which is roughly the population of a village like Blakeney in Gloucestershire, England.
While a few particularly expensive cases have caused the total value to skyrocket, 2023 also saw an 18% increase in the number of frauds reported.
Yet even that may just be the tip of the iceberg: estimates from the Crime Survey for England and Wales for the year ending 30 June 2023 suggest that fewer than one in seven fraud offences were reported to the police or Action Fraud, the UK's national reporting centre for fraud.
Nevertheless, the number of reported cases is still significantly lower than it was before the COVID-19 pandemic.
BDO's report covered reported cases over £50,000 from 1 December 2022 to 30 November 2023.
'An epidemic of scams': Key trends in 2023
High-value cases dominated the year and showed a 60% increase compared to the previous 12 months.
"While the volume reported was the second-largest annual amount in the last decade [...], more than half of it derived from just two longrunning cases which in aggregate represented almost 70% of the reported fraud value in the year," said Kaley Crossthwaite, one of the report's authors from BDO's forensic accounting and valuation services.
One of these cases was a £585 million settlement of a bribery case at gambling giant Entain, the other was Bernie Ecclestone's tax evasion case, which ended with him paying £650 million to the authorities.
These two cases particularly affected the overall numbers of financial crime by type: Entain's case pushed corruption to the top spot, knocking down the previous year's money laundering. Ecclestone's fraud pushed the total value of tax fraud to £515 million, an increase of 228% on the previous year.
These two categories - corruption and tax fraud - emerged to be the leading cases among fraud types by value during the period in question and represented almost half of the overall value, standing at some £1.1 billion.
A 'cybercrime pandemic' and how social media is involved
Armed with the latest technology, such as Artificial Intelligence (AI), criminals' activities increased against a backdrop of people and companies battling serious financial pressure, due to the high cost of living and supply chain problems in the wake of geopolitical tensions, BDO said.
There was a large increase in the reported online scams throughout the 12 months to 30 November 2023, according to the report. UK banks have warned of "an epidemic of scams" and huge spikes seen in fraudulent Authorised Push Payment (APP) transactions.
"Sadly, I’m not surprised by this increase in reported fraud numbers, it is consistent with the significant surge of frauds our forensic investigations team have seen on the ground this year, including a cybercrime pandemic and a wide array of financial statement misstatement frauds," said Caryn Deeley, head of forensic accounting and valuation services at BDO.
Barclays Bank stated earlier in 2023 that more than 70% of scams were now happening on social media, online marketplaces and dating apps.
TSB Bank also reported in November 2023 that purchase fraud was up by 35% and accounted for over half (52%) of all their fraud cases with an average loss of £500 per case, naming Facebook Marketplace as the biggest driver of purchase fraud – 77% of cases originated on the platform, according to the lender.
ADVERTISEMENTAI-powered scams
Cybercriminals created their version of ChatGPT just months after it was launched and plenty of new fraud-related chatbots appeared on the Dark Web since, stated the report.
These tools are marketed for illegal activities, helping individuals to write malware or phishing emails that successfully lure people into providing their login credentials or making payments.
"Increased use of rapidly developing AI has made cyber-risks harder to control, often intersecting with other risks. Opportunities for fraud greatly increase with wider access to AI technology," according to the BDO report.
How the rise of subscription fees at streaming services inspired fraud
Mainly due to the £585 million Entain case, arts, entertainment and recreation ranked as the highest reported fraud sector in the year.
In many cases, fraudsters seized on opportunities to provide illegal methods of viewing films and television content, after official providers' subscription prices increased, leaving people already battling a significant cost of living discontent, according to BDO.
ADVERTISEMENTIn one case, five men set up a mechanism to illegally stream Premier League football matches to tens of thousands of people. In May 2023, they were convicted of conspiracy to defraud and money laundering after generating more than £7 million over five years.
Besides this sector, public administration (£530 million), professional, scientific and technical services (£281 million), construction (£155 million) and non-corporate (individuals) (£95 million) made up the top five, as well as 67% of the total fraud value reported in the year.
Predictions for 2024
A steady stream of cyber-enabled attacks on both consumers and businesses is on the way in 2024, according to the report.
"Foreseeing 2024, Cyber threats know no boundaries," said Vijay Velu, global head of offensive security and DFIR services at BDO in the report. "We predict an escalation in cyber fraud complexity, with fraudsters exploiting the rise of AI and deepfake tools."
"There is an intensifying dependency on digital interfaces, particularly with mobile networks, cloud, and financial services," Velu added. "All types of businesses are expected to be a magnet, (including charities) for sophisticated social engineering and evolved ransomware threats."
ADVERTISEMENTThe reported cases of environmental, social and corporate governance (ESG) fraud are also likely to rise, as companies take ESG increasingly seriously and regulation evolves around in this field.
It may naturally lead to more ESG-related financial crime matters being reported and more cases of greenwashing and carbon credit frauds reaching the courts, according to BDO.
Legislative changes in the UK could also drive case numbers higher. In particular, the Economic Crime and Corporate Transparency Act's new "failure to prevent" fraud offence is expected to hold companies liable for fraud offences committed by an "associate", for the organisation’s benefit, unless they can prove that they had reasonable fraud prevention procedures in place.
Another change to banking regulations coming into force in 2024 will have banks reimburse certain victims of APP frauds, therefore adding to the reported cases.
