Financial services is UK's biggest loser to fraud

Financial services loses more to fraud each year than any other private sector industry in the UK, according to the National Fraud Authority (NFA).

Fraud costs the financial services industry £3.8bn a year, the NFA figures estimate, accounting for almost half of all the £9.3bn private sector fraud.

In insurance, fraud cost the industry £2.08bn during 2008, though these losses only apply to the general insurance market as undetected fraud in long-term insurance is believed to be very low, the NFA data suggests.

However, the ABI believes the industry may have lost a further £1.9bn in undetected fraud during 2008, up 24% since 2006.

In the mortgage sector the NFA found a culture of underreporting losses, with lenders suggesting mortgage fraud losses during 2008 amounted to about £150m despite several high profile cases which point to a much higher figure.

Last March, Bradford & Bingley reported a £40m mortgage fraud and set aside £270.8m to cover potential losses from fraud and professional negligence.

Similarly, Chelsea Building Society reported in August 2009 they had identified fraud of up to £41m.

Despite confirmed mortgage fraud losses for these two lenders alone exceeding £80m, both lenders account for only 4.8% of all mortgage lending during 2008.

Mortgage fraud losses during 2008 are likely to be much higher than the fraud losses provided to the NFA in February 2009.

Industry experts, including the Council of Mortgage Lenders, put the real figure of mortgage fraud at closer to £1bn, according to the NFA.

In 2009, KPMG reported fraud cases worth over £1.1bn came to UK courts in 2008, the highest level recorded since 1995.