Fraud costs the global economy over US$5 trillion
Fraud is costing businesses and individuals across the world US$5.127 trillion each year, according to research published today.
The Financial Cost of Fraud Report, developed by national audit, tax, advisory and risk firm, Crowe, in conjunction with the Centre for Counter Fraud Studies at the University of Portsmouth.
The report, which is the seventh to be published since 2009, draws on over 20 years’ extensive research, reviewing a total of 690 loss measurement exercises across a range of industries, expenditure, organizations and countries.
Jim Gee, Partner and National Head of Forensic Services at Crowe, said:
“In the ten years since the first Financial Cost of Fraud report was published, the global economy has suffered rising losses each year, owing to a multitude of new and diverse threats. Losses in 2018 averaged 7.15% of expenditure, compared to 4.6% in 2007.
“The figures quoted in the 2019 report are stark. Globally, fraud losses equate to a shocking US$5.127 trillion each year, which represents almost 70% of the $7.442 trillion which world spends on healthcare each year .
Nonetheless, the report also highlights that, for many businesses, fraud is a problem that can be tackled. There are examples of where this cost has been reduced by up to 40%. It is estimated that, were organizations to correctly measure, manage and introduce procedures to reduce fraud, potential savings of up to US$2 trillion could be saved annually.
Jim Gee added:
“Sadly, too many organizations adopt a reactive approach to fraud and only look to tackle it once it has taken place, and losses have already occurred. A change of perspective is needed. Fraud is an ever present, high volume, low value problem and only a small proportion is detected. The question is not if it is taking place, but at what level. We need to view fraud as a business cost – by understanding the nature and scale of the cost, we can reduce its extent – enhancing the profitability of companies and ensuring better funded public sector and charitable organizations.”