Fraud is a growing concern for the charity sector, with threats emerging from both internal and external sources. According to the BDO Charity Fraud Report 2024, 42% of charities have experienced a case of fraud in the past year, with 84% suffering a financial loss as a result. The average loss per fraud ranged between £102,000 and £197,000, with total losses accounting for between £5.9m and £11.4m.1
High-profile cases, such as the £860,000 embezzlement by a charity director at Foyle Youth and Community, demonstrates that charities are not immune to fraud attempts but rather seemingly becoming prime targets due to lax controls.
So, why should Charities consider Fraud insurance?
The financial cost of fraud is
significant: According to a BDO survey, more than two-thirds (69%) of all fraud victims experienced losses under £100,000, an increase from 65% last year. However, 10% of victims suffered losses of up to £1m while 5% reported losses exceeding £1m, proving that fraud can often have a significant impact on a business, both financially and otherwise.
Identifying the perpetrators:
In a sector that relies heavily on generosity and voluntary support, ‘donors’ can often be the source of fraud. The BDO survey highlights a persistent risk of fraud originating within charities: 50% of all frauds committed are committed by staff, volunteers and trustees, consistent with findings from the previous two years. In contrast, 29% of frauds were perpetrated by individuals with no connection to the charity, marking a 6% increase from the previous years.
Understanding charity fraud:
- Internal fraud: Examples include misuse or theft of funds by staff or volunteers. Misappropriation of cash or assets accounted for 40% of fraud reported, according to the BDO report 2024. For real world examples on insider fraud in charities, you can find out more here: Case studies of insider fraud in charities – Case study – GOV.UK3
• External fraud: Examples include phishing attacks, social engineering or supplier scams. Over the past 12 months, authorised push payment or payment diversion fraud accounted for 33% of fraud reported.
Considerations Before Purchasing A Fraud
Fraud can have a detrimental effect on charities, leading to strained financial resources, damaged reputations, and eroded trust among stakeholders. To safeguard against these risks, it is essential to ensure your charity has the appropriate insurance coverage and risk management framework in place.
Beginning by thoroughly assessing potential risks is a vital first step in selecting a suitable policy. Consider all possible vulnerabilities that may arise during or as a result of your charity’s
activities. Reflect on the following questions: Could your charity be exposed to fraudulent activity? Are there robust internal controls to prevent and detect fraud? Are staff, volunteers and third parties informed about how to address fraud?
Whilst there are positive strides being made to detect and prevent fraud, the industry must remain vigilant in assessing these threats. Fraud insurance offers peace of mind if the worst was to happen – our team can help recover losses quickly and offer peace of mind in a volatile environment. The policy will also cover costs related to business disruption as part of your fraud response plan, such as legal fees and investigation expenses. Based on the BDO report, there was a notable increase in the adoption of fraud/cyber insurance for the charity sector, rising to 62% compared to 52% last year.
This proves that the sector is coming together to fight the risk of fraud head on and finding real value in having such an insurance cover in place.
ACKNOWLEDGEMENT
Written by Vikshay Vijai, Fraud & Crime Practice Leader at Allianz Trade
DISCLAIMER
Published 2025. © Fraud Advisory Panel and Charity Commission for England and Wales, 2025. Fraud Advisory Panel and Charity Commission for England and Wales will not be liable for any reliance you place on the information in this material. You should seek independent advice.
