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Year-on-year rising levels of fraud, further exacerbated by the COVID-19 pandemic, prompted the government to relaunch the Joint Fraud Taskforce at the end of October 2021. According to a statement, the aim is to strengthen fraud defences by “commit[ing] industry leaders to work with government to deliver new, innovative projects with the ultimate aim of reducing the growing threat and protecting the public”.
With ambitions to counter fraud through public-private partnership, the taskforce has kickstarted with three brand new fraud charters, one of which is the Accountancy Sector Fraud Charter. The Institute of Financial Accountants is one of the signatories of this charter. Here, Anne Davis, Director of Professional Standards explores what this charter means for IFA members.
According to Action Fraud, they received 875,622 reports of fraud between 2020 & 2021, equating to £2.35bn reported losses through fraud related crimes. The charters have been established with a view to helping to remove the systemic vulnerabilities exploited by criminals for financial gains through fraud. They are part of the wider Economic Crime Plan 2019-2022, which seeks to tackle the overall issue of £37billion worth of economic crimes in the UK. The hope is that these measures will ultimately protect individuals, undermine criminal activities and funding, make the UK a better place to do business, and ultimately drive down extraneous costs.
While the retail banking fraud charter and the telecommunications fraud charter focus on the direct role that these sectors can play in undermining financial fraud, the accountancy charter respects the ancillary role that accountants play in managing fraud, highlighting it as a vital position for combating economic crime. It begins “Whilst the proportion of fraud that involves an accountant or the accountancy sector may be small, the role that an accountant plays can be important”. The charter recognises that accountants have a unique and influential role in managing client and business finances, making accountants an essential part of the prevention and detection strategy, while also being a potential target for fraudsters to exploit.
What is key, is that the charter has set out four actions that we as a sector have to achieve, and for which each individual accountant will have to share the burden of responsibility, either directly or through professional body membership. These are:
As well as identifying these actions, the charter identifies the fraud risk threats for the sector, including disparities in fraud resourcing, and accountant misrepresentation, alongside the opportunities for influencing behaviours, and accessing pertinent data. As highlighted, our sector is hugely diverse, with both qualified and unqualified accountants, non-mandatory membership of some 13 professional bodies, and firms that span from a sole trader to a large multi-national, not to mention those working within business. This means that the type and scale of fraud that each accountant will encounter will be different, and so too will the resources and training that are required to spot them. The other challenge of course is accountants’ unique positions as ethical and trusted advisers to clients, which creates vulnerability to exploitation and impersonation, as their reputation adds legitimacy to otherwise fraudulent claims.
Ultimately, what these reforms and the charter mean for the sector is increased awareness of sector specific fraud threats, improved information sharing, enhanced accuracy and transparency of Companies House information and educational toolkit aimed at accountants with the ultimate aim of changing behaviours through education. It will affect every individual accountant and firm, but the brunt of the initial effort will be borne by the professional bodies working in the sector. We welcome the launch of the Accountancy Sector Fraud Charter which will enhance cross-sector collaboration in the fight against fraud. Collaborative working across sectors has the potential to improve communication on new and emerging fraud threats as well as education, which will benefit our members, their clients, their employers and wider society. We have already contributed to stakeholders' meetings and are submitting representation on Companies House Reforms, and look forward to continuing to work with Companies House to improve that usability of data held in Companies House.
We know that the IFA, and its members and firms, are committed to preventing, detecting and reporting fraud to the proper authorities. We will be working with law enforcement, accountancy sector professional bodies and other stakeholders to gain a better understanding of fraud threats, increase fraud awareness and provide tools to help our members combat fraud.
For further information on fraud prevention in the accountancy sector, the IFA is holding a session on fraud, including proactive steps for prevention, as part of its International Conference on 25 November 2021.