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Cutbacks mean reduced investment in checking processes and increased opportunities for fraud


Budget cuts will leave employers more exposed to fraudsters as the UK moves out of recession, according to PricewaterhouseCoopers (PwC).

According to the PwC report, pay freezes and reduced career mobility have made employees anxious about maintaining their living standards and their career prospects. And back-office cutbacks mean more work is signed off with less scrutiny. In addition, internal audit activities have been pared back, and that can lead to new windows of opportunity for fraudsters.

Tony Parton, PwC partner and forensic accountant, said: "We are living through a period of pay freezes and slow economic growth and the recovery may be a long slog. For some, the desire to maintain their living standards can drive them to cross the line into committing fraud.

"Even as the UK comes out of recession the motivators for fraud will persist. Pay rises and rewards will not kick in for a year or more after any significant economic recovery, so workers' experiences are unlikely to match news of improvements in share prices or trading conditions.

"Reduced investment in compliance and checking processes makes it easier for fraudsters, both inside and outside organisations, to exploit weaknesses and opportunities. The result for the company can be reputational damage and stiff fines."

Nearly half (46%) of UK public-sector respondents to PwC's recent Global Economic Crime Survey reported an increase in economic crime incidents in the past year. Public- sector organisations will be particularly vulnerable to fraud this year as the full impact of the downturn shifts from the private to the public sector.