Collin BelcherSenior ManagerNational Fraud Authority

Annual Fraud Indicator 2013Charity Fraud

What is the Annual Fraud Indicator?The Annual Fraud Indicator (AFI) is a compendium of fraud loss indicators.

In line with Fighting Fraud Together, the AFI covers fraud against all types of victims in the UK be they

public, private, not-for-profit or individuals.

It also includes primary research in the form of surveys e.g:

• The Private Sector Survey

• The Charity Sector Survey

The report brings together existing estimates of fraud in the public domain e.g:

• HMRC (National Statistics)

• DWP (National Statistics)

• NHS

• UK Payments

• ABI

Measurement of fraud NFA business plan 2012-13

“To improve our measurement of the scale and breakdown of the fraud problem

and to develop more sophisticated and rigorous measures of performance

across all areas of fraud awareness, prevention and enforcement”.

The AFI will be improved in the following ways:

• There will be improved confidence levels in the fraud estimates across

different sectors.

• Gaps in our estimates of fraud losses will be reduced.

• Where we have reliable measures of loss affecting particular sectors, we

will begin to track changes in fraud loss levels.

Annual Fraud Indicator 2013

• The AFI 2013 is the NFA’s fourth Annual Fraud Indicator

• This year the report puts fraud loss to the UK at £52 billion

• The AFI does not indicate trend – it seeks to highlight the potential scale of the problem.

• The AFI is an important tool in raising awareness of fraud

AFI 2013 Headline Findings• The AFI covers fraud against all types of victims – public, private, charity and individuals.

• This year’s report includes identified fraud loss of £15.5bn and hidden fraud losses £36.5bn by type of victim. This equates to £52 billion.

Fraud by Victim Type

Private Sector fraud - £21.2bn

Public Sector fraud - £20.6bn

Charity Sector fraud - £147m

Individuals - £9.1bn

AFI 2013 – Identified fraud losses

‘Identified fraud’ - fraud that has been

measured, or extrapolated based on a

measurement exercise or survey.

AFI 2013 – Hidden fraud losses

‘Hidden fraud’ – fraud that has not been

detected nor identified through a

measurement exercise or survey.

Charity Sector Survey 2013The survey research design improvements.

• Sampling frame excluded charities with less than 100k income:

• Assumptions have been applied to the data received from larger charities to

estimate a small charities fraud loss figure in the overall fraud loss estimate.

• Better specification of the fraud loss estimate questions to enhance cognitive

understanding:

• Reducing ambiguity in the question and ensuring more consistency in responses.

• More robust analysis:

• Outliers and bias designed out by the above.

• Weighting the percentage fraud loss by income band.

Breakdown of lossQuantitative survey with 1,599 charities. 9% were a victim of fraud.

Estimated losses of 0.22 per cent of income (£66bn), with 0.04 per cent lost to identified

fraud and 0.17 per cent lost to hidden fraud. This is approximately equivalent to £147m per

annum.

Victim

(Income band)Identified Hidden Total

fraud loss

Up to £100,000 £1m £4m £5m

£100,001 - £500,000 £11m £5m £16m

£500,001 - £5 million £14m £9m £23m

£5 million + £4m £99m £103m

Fraud types suffered

Fraud enablers – cyber and insider

• 1 in 10 (9.2%) of charities with an income over £100,000 detected fraud

• 13.6% of victims said that the fraud(s) they had suffered were cyber-enabled

• 23.1% of victims said that the fraud(s) they had suffered were insider-enabled

• Only 21% of charities attempt to measure their fraud loss

How does the charity sector compare to others?3.76% Public sector

1.03% Individuals

0.54% Private sector

0.22% Charity sector

Losses quoted as a percentage of turnover/income