Charities 'lose hundreds of thousands to fraud each month'

Detective Chief Inspector Andy Fyfe of the City of London Police tells launch event for Fraud Awareness Week that 823 employee frauds against charities were reported in the past six months

Cyber fraud is a growth area
Cyber fraud is a growth area

Charities are losing hundreds of thousands of pounds a month to fraud, with more than 800 instances of charity employees defrauding their organisations reported to authorities over the past six months, according to City of London Police.

Speaking at the launch event for Fraud Awareness Week, Detective Chief Inspector Andy Fyfe of the National Fraud Intelligence Bureau at the City of London Police said 823 employee fraud cases against charities had been reported in the past six months.

The largest of these involved a trustee who defrauded their charity of £1.2m, Fyfe said.

He said there had also been 298 cases of victim donation fraud in the past six months, worth approximately £200,000 a month.

Fraud remained a largely under-reported crime and is believed to cost the charity sector £2bn a year, attendees at the launch event heard, with cyber crimes alone now accounting for 50 per cent of all crimes in the UK.

Fyfe said the figures the police had were much lower than the actual prevalence of fraud in the sector, and the figures therefore did not fully represent the scale of the problem across the country.

In cases reported to the police of chief executive fraud – which involves people pretending to be senior staff members or suppliers – there had been 4,154 reports by all businesses, including charities, in the past six months, Fyfe said.

This meant that average losses across the country in all sectors from chief executive fraud were approximately £12m a month.

Computer software service fraud – where fake technicians pretend to be from IT firms to gain access to computers and personal data – affecting organisations including charities had occurred 11,731 times in the past six months, Fyfe said, and cost approximately £1m a month.

He said a number of fake websites were set up in the wake of the Grenfell Tower fire, with 62 domain names associated with the fire set up in the first week to try to encourage people to make donations.

Fyfe said that ransomware attacks – where files are encrypted in order to get a ransom paid to decrypt information – accounted for about 50 per cent of all reports of cyber fraud.

Despite the risk of fraud, Dave Carter, head of counter fraud at the British Council, said he was one of only four heads of counter fraud employed in the entire charity sector, highlighting how even larger charities remained susceptible.

Helen Stephenson, chief executive of the Charity Commission, said a study by the regulator of a sample of charity frauds found that a third were perpetrated by charity employees, with the highest reported fraud to the commission amounting to £1m.

She said that weak financial controls and poor governance were among the most prevalent contributory factors to fraud in the sector, and that strengthening these areas was the "essential foundation for tackling fraud and developing a counter-fraud culture in charities".

She stressed the importance of reporting fraud to the police and the Charity Commission, and said doing so would be seen by the regulator as a sign of good governance at the affected charity.

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