The good practice guidance, ‘Counter-fraud good practice for food and drink businesses’, was developed by the CIEH’s food community in collaboration with Portsmouth University’s Centre for Fraud Studies and is supported by the Food Standards Agency’s National Food Crime Unit, Food Standards Scotland’s Food Crime and Incidents Unit and the Intellectual Property Office.
CIEH’s Eoghan Daly, co-author of the guidance, said that despite extensive work being undertaken by food and drink businesses, there was no reliable information about the nature and extent of fraud affecting the sector.
“This is a serious problem as fraud not only has the potential to impact on an individual business’s profits and reputation but it also reflects on the food industry as a whole and more importantly risks consumers’ trust and health,” said Daly.
“Food businesses need to quickly change their approach and adopt good practice in counter fraud as a key element of day-to-day business, before profits are hit and they lose customers.”
Fraud can take many forms
In the food and drink industry, fraud can take many forms, such as the inclusion of contaminated substances in products, misleading claims being made in terms of quality or quantity or even the creation of fictitious companies to receive goods on credit, that then disappear without paying bills.
Despite extensive work undertaken by food and drink businesses to address fraud, there is no evidence that firms are measuring the financial costs of fraud to their organisations, the guide says.
Without this information, the guidance warns the industry will find it difficult to determine whether fraud is increasing or decreasing and whether or not its actions are effective.
To better protect themselves, CIEH is urging the industry to adopt comprehensive counter-fraud strategies based on reliable evidence of the nature and scale of all fraud risks facing an organisation.
This means companies have to think wider than just focusing on known fraud issues related to products or ingredients, argued the CIEH.
“Fraud undermines the financial health and reputation of food and drink businesses,” said fellow co-author of the guidance Jim Gee, visiting professor and chair of the Centre for Counter Fraud Studies at the University of Portsmouth.
“It is the last, great unreduced business cost with the latest research data, across 17 years, showing that this cost averages over 5% of expenditure.
“The better news is that there are examples where businesses have cut this cost by up to 40% within 12 months, significantly improving profitability. This guide shows how that can be achieved.”
Daly added: “Fraudsters work hard to hide their activities, making the worst – and most costly – scams subtle and difficult to detect.
Other vulnerabilities exploited
“This means that the number of potential frauds is practically unlimited and once one type of fraud is successful other vulnerabilities may be exploited. Fraud is damaging to everyone and needs to be stamped on in order to prevent the scammers from doing any more harm.”
Ron McNaughton, head of the Scottish Food Crime and Incidents Unit, said: “The Scottish Food Crime & Incidents Unit [is] committed to working with industry and partners to ensure that any efforts to tackle food fraud are collaborative and consistent across the UK. Those who perpetrate fraud do not recognise borders, it is therefore crucial that we work together.
“Ultimately it is the public that pay the price. I would urge the industry to promote this guide and encourage those working in the food industry to play their part in combatting food fraud. We believe that this guide will help businesses understand the many risks involved in food fraud and the measures that can be brought into place to mitigate the risks.”
Meanwhile, don’t miss our exclusive video interview with Andy Morling, head of the Food Crime Unit, filmed at last month’s Food Manufacture food safety conference.
Proposed counter-fraud strategies
- Calculating the financial cost of fraud based on reliable estimates, including detected and undetected instances
- Ensuring counter-fraud tactics are centrally managed, with sufficient authority to secure necessary changes
- Conduct proactive and regular counter-fraud exercises early rather than waiting for problems to be reported
- Develop an anti-fraud culture, which ensures robust, deterrent action is taken when issues are identified
- Making use of the skills and experience of accredited counter-fraud professionals and engaging with government organisations, such as the Food Standard Agency’s National Food Crime Unit, to ensure the overall fight against fraud is strengthened