Pensions Fraud Risk

PENSIONS FRAUD RISK SURVEY 2012 HEADLINE RESULTS Accuracy of member data is considered the most vulnerable area of fraud Only 7.5% |35% |16% of trustee respondents failed to recognise they are responsible for the detection and prevention of fraud of schemes have of schemes have not introduced a formal fraud response policy tested internal controls for more than a year 19% 2012 +55% 21% 2012 +40% 19% of survey respondents report having suffered from fraud during the last 12% 2011 24 months - a 55% rise 21% of respondents say they have not actively considered fraud risks over 15% 2011 the past 12 months- up from 15% last year on last year INTRODUCTION According to the National Fraud Authority, fraud costs the UK in general an estimated £73 billion Almost Just over 1/5 20% of schemes reported some fraudulent activity within the last two years of trustee boards have given no consideration to the threat over the past 12 months every year. The Baker Tilly Pensions Fraud Risk Survey 2012 reveals the incidence of fraud in UK pension schemes and shows how trustees and pension managers have responded to the risk. HOW PREVALENT IS FRAUD IN PENSION SCHEMES? Our survey shows fraud has risen sharply over the past year. In 2011's survey, 12% of respondents reported having suffered from fraud over the previous 24 months. This year, 19% have reported fraud over the same timeframe – a 55% increase. To your knowledge, has your scheme suffered from any form of fraud? I No I Yes, in the last 12 months I Yes, in the last 24 months 5% 14% 81% To your knowledge, has your scheme suffered from any form of fraud (based on scheme size)? I No I Yes, in the last 12 monthsI Yes, in the last 24 months 0-1,000 1,000-10,000 | 10,000 members members members 4% 5% 62% 7% 30% 96% 88% WHAT PRACTICAL STEPS CAN BE TAKEN TO MITIGATE THE RISKS OF FRAUD? Trustees have a statutory responsibility 1 to demonstrate how they have complied with their duties of Include fraud risk and related internal controls in your risk register and regularly test the internal controls - extend the statement in your Annual Report covering key risks and internal controls to also consider fraud risk preventing and detecting fraud. Define your fraud risk policy and allocate responsibility clearly to ensure that everyone (including third party service providers) knows their obligations and how to take action 3. Consider fraud risk more regularly than at present - ideally at least twice a year in the current economic climate Collate information on fraud cases and ensure the warning signs are widely recognised e.g. lack of segregation of duties, constant breakdowns in internal controls, individuals who work long hours, may have financial problems, or their lifestyle does not appear to be commensurate with salary Educate employees fraud, how to report it and why it is unacceptable that they too know how to recognise CONTACT US Marcus McCaffery Partner, Forensic Services [email protected] BAKER TILLY Tel: 020 3201 8000 www.bakertilly.co.uk lan Bell Head of Pensions [email protected] PENSIONS FRAUD RISK SURVEY 2012 HEADLINE RESULTS Accuracy of member data is considered the most vulnerable area of fraud Only 7.5% |35% |16% of trustee respondents failed to recognise they are responsible for the detection and prevention of fraud of schemes have of schemes have not introduced a formal fraud response policy tested internal controls for more than a year 19% 2012 +55% 21% 2012 +40% 19% of survey respondents report having suffered from fraud during the last 12% 2011 24 months - a 55% rise 21% of respondents say they have not actively considered fraud risks over 15% 2011 the past 12 months- up from 15% last year on last year INTRODUCTION According to the National Fraud Authority, fraud costs the UK in general an estimated £73 billion Almost Just over 1/5 20% of schemes reported some fraudulent activity within the last two years of trustee boards have given no consideration to the threat over the past 12 months every year. The Baker Tilly Pensions Fraud Risk Survey 2012 reveals the incidence of fraud in UK pension schemes and shows how trustees and pension managers have responded to the risk. HOW PREVALENT IS FRAUD IN PENSION SCHEMES? Our survey shows fraud has risen sharply over the past year. In 2011's survey, 12% of respondents reported having suffered from fraud over the previous 24 months. This year, 19% have reported fraud over the same timeframe – a 55% increase. To your knowledge, has your scheme suffered from any form of fraud? I No I Yes, in the last 12 months I Yes, in the last 24 months 5% 14% 81% To your knowledge, has your scheme suffered from any form of fraud (based on scheme size)? I No I Yes, in the last 12 monthsI Yes, in the last 24 months 0-1,000 1,000-10,000 | 10,000 members members members 4% 5% 62% 7% 8% 30% 96% 88% WHAT PRACTICAL STEPS CAN BE TAKEN TO MITIGATE THE RISKS OF FRAUD? Trustees have a statutory responsibility 1 to demonstrate how they have complied with their duties of Include fraud risk and related internal controls in your risk register and regularly test the internal controls - extend the statement in your Annual Report covering key risks and internal controls to also consider fraud risk preventing and detecting fraud. 2 Define your fraud risk policy and allocate responsibility clearly to ensure that everyone (including third party service providers) knows their obligations and how to take action 3. Consider fraud risk more regularly than at present - ideally at least twice a year in the current economic climate 4 Collate information on fraud cases and ensure the warning signs are widely recognised e.g. lack of segregation of duties, constant breakdowns in internal controls, individuals who work long hours, may have financial problems, or their lifestyle does not appear to be commensurate with salary Educate employees fraud, how to report it and why it is unacceptable that they too know how to recognise CONTACT US Marcus McCaffery Partner, Forensic Services [email protected] BAKER TILLY Tel: 020 3201 8000 www.bakertilly.co.uk lan Bell Head of Pensions [email protected] PENSIONS FRAUD RISK SURVEY 2012 HEADLINE RESULTS Accuracy of member data is considered the most vulnerable area of fraud Only 7.5% |35% |16% of trustee respondents failed to recognise they are responsible for the detection and prevention of fraud of schemes have of schemes have not introduced a formal fraud response policy tested internal controls for more than a year 19% 2012 +55% 21% 2012 +40% 19% of survey respondents report having suffered from fraud during the last 12% 2011 24 months - a 55% rise 21% of respondents say they have not actively considered fraud risks over 15% 2011 the past 12 months- up from 15% last year on last year INTRODUCTION According to the National Fraud Authority, fraud costs the UK in general an estimated £73 billion Almost Just over 1/5 20% of schemes reported some fraudulent activity within the last two years of trustee boards have given no consideration to the threat over the past 12 months every year. The Baker Tilly Pensions Fraud Risk Survey 2012 reveals the incidence of fraud in UK pension schemes and shows how trustees and pension managers have responded to the risk. HOW PREVALENT IS FRAUD IN PENSION SCHEMES? Our survey shows fraud has risen sharply over the past year. In 2011's survey, 12% of respondents reported having suffered from fraud over the previous 24 months. This year, 19% have reported fraud over the same timeframe – a 55% increase. To your knowledge, has your scheme suffered from any form of fraud? I No I Yes, in the last 12 months I Yes, in the last 24 months 5% 14% 81% To your knowledge, has your scheme suffered from any form of fraud (based on scheme size)? I No I Yes, in the last 12 monthsI Yes, in the last 24 months 0-1,000 1,000-10,000 | 10,000 members members members 4% 5% 62% 7% 8% 30% 96% 88% WHAT PRACTICAL STEPS CAN BE TAKEN TO MITIGATE THE RISKS OF FRAUD? Trustees have a statutory responsibility 1 to demonstrate how they have complied with their duties of Include fraud risk and related internal controls in your risk register and regularly test the internal controls - extend the statement in your Annual Report covering key risks and internal controls to also consider fraud risk preventing and detecting fraud. 2 Define your fraud risk policy and allocate responsibility clearly to ensure that everyone (including third party service providers) knows their obligations and how to take action 3. Consider fraud risk more regularly than at present - ideally at least twice a year in the current economic climate 4 Collate information on fraud cases and ensure the warning signs are widely recognised e.g. lack of segregation of duties, constant breakdowns in internal controls, individuals who work long hours, may have financial problems, or their lifestyle does not appear to be commensurate with salary Educate employees fraud, how to report it and why it is unacceptable that they too know how to recognise CONTACT US Marcus McCaffery Partner, Forensic Services [email protected] BAKER TILLY Tel: 020 3201 8000 www.bakertilly.co.uk lan Bell Head of Pensions [email protected] PENSIONS FRAUD RISK SURVEY 2012 HEADLINE RESULTS Accuracy of member data is considered the most vulnerable area of fraud Only 7.5% |35% |16% of trustee respondents failed to recognise they are responsible for the detection and prevention of fraud of schemes have of schemes have not introduced a formal fraud response policy tested internal controls for more than a year 19% 2012 +55% 21% 2012 +40% 19% of survey respondents report having suffered from fraud during the last 12% 2011 24 months - a 55% rise 21% of respondents say they have not actively considered fraud risks over 15% 2011 the past 12 months- up from 15% last year on last year INTRODUCTION According to the National Fraud Authority, fraud costs the UK in general an estimated £73 billion Almost Just over 1/5 20% of schemes reported some fraudulent activity within the last two years of trustee boards have given no consideration to the threat over the past 12 months every year. The Baker Tilly Pensions Fraud Risk Survey 2012 reveals the incidence of fraud in UK pension schemes and shows how trustees and pension managers have responded to the risk. HOW PREVALENT IS FRAUD IN PENSION SCHEMES? Our survey shows fraud has risen sharply over the past year. In 2011's survey, 12% of respondents reported having suffered from fraud over the previous 24 months. This year, 19% have reported fraud over the same timeframe – a 55% increase. To your knowledge, has your scheme suffered from any form of fraud? I No I Yes, in the last 12 months I Yes, in the last 24 months 5% 14% 81% To your knowledge, has your scheme suffered from any form of fraud (based on scheme size)? I No I Yes, in the last 12 monthsI Yes, in the last 24 months 0-1,000 1,000-10,000 | 10,000 members members members 4% 5% 62% 7% 8% 30% 96% 88% WHAT PRACTICAL STEPS CAN BE TAKEN TO MITIGATE THE RISKS OF FRAUD? Trustees have a statutory responsibility 1 to demonstrate how they have complied with their duties of Include fraud risk and related internal controls in your risk register and regularly test the internal controls - extend the statement in your Annual Report covering key risks and internal controls to also consider fraud risk preventing and detecting fraud. 2 Define your fraud risk policy and allocate responsibility clearly to ensure that everyone (including third party service providers) knows their obligations and how to take action 3. Consider fraud risk more regularly than at present - ideally at least twice a year in the current economic climate 4 Collate information on fraud cases and ensure the warning signs are widely recognised e.g. lack of segregation of duties, constant breakdowns in internal controls, individuals who work long hours, may have financial problems, or their lifestyle does not appear to be commensurate with salary Educate employees fraud, how to report it and why it is unacceptable that they too know how to recognise CONTACT US Marcus McCaffery Partner, Forensic Services [email protected] BAKER TILLY Tel: 020 3201 8000 www.bakertilly.co.uk lan Bell Head of Pensions [email protected] PENSIONS FRAUD RISK SURVEY 2012 HEADLINE RESULTS Accuracy of member data is considered the most vulnerable area of fraud Only 7.5% |35% |16% of trustee respondents failed to recognise they are responsible for the detection and prevention of fraud of schemes have of schemes have not introduced a formal fraud response policy tested internal controls for more than a year 19% 2012 +55% 21% 2012 +40% 19% of survey respondents report having suffered from fraud during the last 12% 2011 24 months - a 55% rise 21% of respondents say they have not actively considered fraud risks over 15% 2011 the past 12 months- up from 15% last year on last year INTRODUCTION According to the National Fraud Authority, fraud costs the UK in general an estimated £73 billion Almost Just over 1/5 20% of schemes reported some fraudulent activity within the last two years of trustee boards have given no consideration to the threat over the past 12 months every year. The Baker Tilly Pensions Fraud Risk Survey 2012 reveals the incidence of fraud in UK pension schemes and shows how trustees and pension managers have responded to the risk. HOW PREVALENT IS FRAUD IN PENSION SCHEMES? Our survey shows fraud has risen sharply over the past year. In 2011's survey, 12% of respondents reported having suffered from fraud over the previous 24 months. This year, 19% have reported fraud over the same timeframe – a 55% increase. To your knowledge, has your scheme suffered from any form of fraud? I No I Yes, in the last 12 months I Yes, in the last 24 months 5% 14% 81% To your knowledge, has your scheme suffered from any form of fraud (based on scheme size)? I No I Yes, in the last 12 monthsI Yes, in the last 24 months 0-1,000 1,000-10,000 | 10,000 members members members 4% 5% 62% 7% 8% 30% 96% 88% WHAT PRACTICAL STEPS CAN BE TAKEN TO MITIGATE THE RISKS OF FRAUD? Trustees have a statutory responsibility 1 to demonstrate how they have complied with their duties of Include fraud risk and related internal controls in your risk register and regularly test the internal controls - extend the statement in your Annual Report covering key risks and internal controls to also consider fraud risk preventing and detecting fraud. 2 Define your fraud risk policy and allocate responsibility clearly to ensure that everyone (including third party service providers) knows their obligations and how to take action 3. Consider fraud risk more regularly than at present - ideally at least twice a year in the current economic climate 4 Collate information on fraud cases and ensure the warning signs are widely recognised e.g. lack of segregation of duties, constant breakdowns in internal controls, individuals who work long hours, may have financial problems, or their lifestyle does not appear to be commensurate with salary Educate employees fraud, how to report it and why it is unacceptable that they too know how to recognise CONTACT US Marcus McCaffery Partner, Forensic Services [email protected] BAKER TILLY Tel: 020 3201 8000 www.bakertilly.co.uk lan Bell Head of Pensions [email protected]