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Internal fraud costs 3 times more than the initial loss, says Cifas


Cifas – the UK's Fraud Prevention Service today releases The True Cost of Insider Fraud. This report is based on research conducted by the University of Portsmouth’s Centre for Counter Fraud Studies. It examined several real life examples of internal frauds from the public and private sectors, the difference between the initial amounts lost to a fraudster and the eventual, total cost of the fraud. The findings give organisations much food for thought:

  • Losses from internal frauds do not just include the sum lost to a fraudster, but encompass a variety of additional costs such as investigations, disciplinary costs, fines/compensation payouts and ‘intangibles’ such as the net impact upon morale, reputation or share price.
  • The smaller the cost of the initial fraud, the greater the increase in the total cost: for example, frauds below £25,000 can incur additional costs nearly three times the size of the initial loss.
  • Public and private sectors differ in the size of losses accrued, particularly with lower level frauds (e.g. under £25,000).
  • The average cost of all frauds examined was 14% greater than the initial sum lost to the fraudster.

These findings are explained in detail in the report. Click here to download a copy of The True Cost of Insider Fraud.


Understanding the impacts of internal fraud

The vast majority of an organisation’s staff are completely trustworthy. Unfortunately, the few exceptions can cause immense damage to an organisation’s financial and reputational wellbeing. By being able to demonstrate just how much greater the average cost of such frauds is to an organisation, this research underlines the need for organisations to appreciate both the scale of the damage done by internal fraud, and the need for adequate vetting.

Simon Dukes, Cifas Chief Executive, comments: “It is easy for employers to be lulled into thinking that internal frauds are few and far between and also small scale. The findings contained within this report demonstrate, however, that every instance of internal fraud will have repercussions far greater than the initial financial loss. In addition, over recent years, the theft of customer data from inside an organisation has become more common: this data is frequently passed to organised criminals and helps to fuel identity crimes as they impersonate victims and steal from customer accounts. Organisations must therefore recognise that such frauds are anything but small scale and inexpensive and that doing everything possible to prevent internal fraud is vital.”


Prevention is better than cure

The findings presented in this report underline that investment in preventative measures such as enhanced vetting, monitoring, training and data sharing are essential in order to avoid the collateral damage that invariably accompanies the financial loss incurred by an internal fraud. Comprehensive HR and fraud prevention strategies are the cornerstones for any organisation wishing to instil a zero-tolerance attitude to fraud.

Simon Dukes concludes: “The cost of fraud is much more far-reaching than a fraud loss figure on the bottom line caused by one rogue individual. This report demonstrates just how much greater those impacts can be. With total costs nearly quadrupling the initial amount lost on smaller frauds (and the cost of investing in preventative steps like our Staff Fraud Database being as little as £10.50 a day) this is a warning to all organisations that they risk making themselves a sitting target if they do not recognise that prevention is far less costly than cure, and invest in a comprehensive and coherent strategy to prevent internal fraud.”


Notes to Editors:

  1. Cifas is the UK's Fraud Prevention Service – providing the UK's most comprehensive databases of confirmed fraud data, as well as an extensive range of fraud prevention services, to 300 organisations from the public and private sectors. Organisations share fraud information in order to prevent fraud and come from a variety of sectors including banking, grant giving, credit card, asset finance, retail credit, mail order and online retailer, insurance, saving, telecommunication, factoring, share dealing, vetting agencies, contact centres and insurance brokering sectors. Cifas is unique and was the first data sharing scheme of its type in the world. Other schemes modelled on Cifas have been set up in Southern Africa and Germany.
  2. Cifas launched its Staff Fraud Database in 2006, which currently has 100 Members encompassing over 230 organisations sharing information on frauds that have been perpetrated against participating organisations. These organisations are drawn from the UK financial services industry, telecommunications, insurance, recruitment and other business sectors. The launch of the Database was carried out in consultation with: the Information Commissioner’s Office, the Financial Services Authority (now Financial Conduct Authority); the Confederation of British Industry; the Trades Union Congress and Chartered Institute for Personnel and Development.
  3. The true cost of internal fraud, expressed as a percentage increase on the initial loss (minus recoveries) can be seen below. These findings are presented in Section 3 of The True Cost of Insider Fraud.



Public Sector

Private Sector

Under £25k Frauds




Under £100k Frauds




Under £1m Frauds




All Frauds





4.    A copy of the research from University of Portsmouth is available upon request.

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