Pictured above: (L to R) Mark Kenkre and Arun Chauhan, joint heads of law firm Challinors' Fraud & Asset Recovery department which recently completed its annual Fraud survey

Despite fraudulent activity rising by 65 percent in the last 12 months, businesses are complacent about the chances of being affected by fraud and see the risk to them as likely to dwindle, according to a Fraud survey by Midlands law firm Challinors.

Based on the findings of its latest annual Fraud & Asset Recovery survey Challinors reports that 57 percent of businesses are unconcerned about being affected by fraud, with only 38 percent worried about being affected, down by 12 percent on the findings of the 2009 report.

"Despite the survey finding that businesses believe the incidence of fraud has increased in Birmingham (35 percent), the Midlands (37 percent), nationally (58 percent) and internationally (50 percent) over the last 12 months, and that fraud activity in general is considered to have increased in the current economic climate (65 percent), businesses are surprisingly over confident they will be immune from the risk themselves," comments Mark Kenkre, joint head of Challinors Fraud & Asset Recovery department. 

"Businesses have to recognise there is an upward trend in the incidence of business fraud and threat from it, and must take a proactive stance to prevent it.

"There is still more than a third (33.9 percent) of businesses that admit to having no internal systems in place to assist to detect fraud. Whilst this is marginally down on last year's survey, there remains 46 percent of businesses without key staff responsible for overseeing systems for detecting fraud, over 62 percent of businesses are failing to offer staff any formal training in spotting fraud, whilst more than half (55 percent) have no fraud response policy in place."

Internet and email scams cost the UK an estimated £3.5 billion each year and according to the survey, businesses have a growing concern over the security of confidential data: "40 percent of businesses are worried data security could be compromised, with the on-line trading sector considered to be at greatest risk (41 percent) from fraudulent activity," says Mark. 

"The survey confirms the insurance sector as the most likely to suffer from the knock-on effects of fraud, evidenced by insurance premiums showing a sustained increase."

Challinors' Arun Chauhan adds: "The survey reveals some interesting explanations as to why fraud continues to be a problem; 61 percent of businesses blame insufficient criminal or financial sanctions that would punish or deter fraudsters from committing the crime. The majority of businesses (76 percent) believe the top fraudsters are simply opportunists but that a lack of legislation on the banks and by the government has played a part, with 66 percent unaware of the Bribery Act and what it can do to protect businesses.

"Fraudsters are becoming increasingly inventive. The Survey reveals that 55 percent of businesses have no fraud response policy in place, The advice to them is to urgently put systems in place and take a proactive stance on preventing fraud. If a business fails to respond quickly to fraud, then assets may be lost for good and become untraceable."

Awareness in the Midlands of its own dedicated, specialist fraud lawyers is on the rise, with 60 percent of the survey's participants knowing of fraud specialists in Birmingham in particular, up from only 40 percent in the 2009 Survey. 

Challinors Fraud Survey was conducted in June 2010, to obtain and analyse the responses of senior representatives of UK businesses on the incidence of and perceived threat from fraud, operating in a diversity of industry sectors including professional services, manufacturing, banking and financial services with annual turnover ranging from £100k to £50m +.

Challinors has offices in Birmingham, West Bromwich, Wolverhampton, Halesowen and Nottingham. The firm has 24 partners and over 100 fee earners, and is ranked as one of the top legal firms in the West Midlands, being Number 1 in the Chambers UK Directory in a number of categories, including Clinical Negligence.