Marsh, and its MMC risk consulting affiliate Kroll, have warned that UK firms are exposed to heightened fraud and corruption risks this year as a result of the global recession.
“In addition, many insurance policies that address fraud risk are based on a historical perception of the economic crime landscape, which can result in policies failing to fully respond to the consequences of the emerging innovations in fraud techniques,” the bulletin added.
Dean White, a Managing Director in the Financial and Professional Practice at Marsh, explained: “The Fraud Act 2006 was a landmark piece of legislation, clarifying and updating the offences of fraud under UK law. Previously offences had to be shoe-horned into the Theft Act 1968. Two years on since its implementation, many fraud insurance policies have still not been adapted to reflect both the changing legislation and new and emerging criminal techniques.
“Clients need to work with their insurers and risk advisers to identify and assess the efficacy of their cover, rather than buy on price alone. Fraud insurance is not ‘all-risks’ protection and individual policies vary significantly in terms of their breadth of coverage and appropriateness for individual business sectors.”
Richard Abbey, Head of Kroll’s London Financial Investigations Practice, added: “The recession is contributing to the increase in fraud. Previously honest employees may be compelled to exploit corporate weaknesses as a result of their own financial situation or low morale; or a well-intentioned worker or ‘corporate saviour’ could juggle numbers to try and mask the company’s true financial position from other stakeholders.
“Companies are more likely to pay closer attention to their balance sheets during tougher times, which means that the chances of fraud being uncovered are far greater. While controls help reduce risk, the majority of frauds are still uncovered by accident or as a result of whistle-blowing. This has to change.”
Marsh noted that as a result of the rise in claims relating to financial crime it has “launched a new claims service to help firms manage claims relating to fraud. The team provides guidance to insureds through the claims process, including policy interpretation advice from specialist claims advocates, calculation of the claim by forensic accountants in accordance with the policy terms, presentation of the claim to insurers and obtaining claim payments or negotiating settlements where required. The service is a collaboration between the Claims Advocacy Unit of Marsh’s Financial and Professional Practice and the Forensic Accounting and Claims Services (FACS) team in the UK.”
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