Commercial fraud outweighing mortgage fraud by over £1.5bn

Commercial fraud outweighing mortgage fraud by over £1.5bn


As the recent £40 million mortgage fraud against Bradford & Bingley dominates headlines, accountants BDO Stoy Hayward have said that commercial fraud is a far bigger problem, and is costing banks in the UK an estimated £2 billion a year. 

Although KPMG has calculated that mortgage fraud costs banks £300 million a year, commercial fraud hitting corporate lending departments is a far graver, and more expensive, issue for banks.


One industry source has said that the fraud being uncovered now “is the tip of an iceberg that is melting very rapidly.” The source added: “It is an iceberg of titanic proportions.”


As the recession worsens and borrowers begin to default on loans, more fraudulent deals will come to light as banks realise that they have provided “toxic” loans against collateral that is worth a lot less than what they have been led to believe. 


Not only does commercial fraud work on a much larger scale, banks rarely recover the losses as they are reluctant to admit that their credit checks and lending standards have failed. Moreover, it is often bank employees that collude with criminals gangs of professionals, made up of solicitors, surveyors and accountants to usher fraudulent claims through credit committees.


Simon Bevan, a BDO partner and head of fraud, commenting on commercial fraud said: “This is the biggest amount of fraud that hits the banks. Mortgage, ATM and credit card fraud is committed by criminals but this is white collar fraudsters. They are not drug dealers, just commercial rascals. But this will become a bigger issue. In about 12 months, as we head in to a downturn, expect to see some very large frauds.”  

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