The Chartered Institute of Environmental Health (CIEH) made the comments at the launch of a report to help businesses adopt good practice against countering fraud.
It said firms should adopt ‘proactive and comprehensive’ counter strategies based on reliable evidence of the nature and scale of all fraud risks facing them.
Measuring fraud costs
There is no evidence that food and drink businesses are measuring the financial costs of fraud, according to the report.
Without this information they will find it difficult to determine whether fraud is increasing or decreasing and whether or not their actions are effective.
CIEH represents over 9,000 members working in the public, private and non-profit environmental health sector.
The guidance was developed by CIEH Food with the University of Portsmouth’s Centre for Counter Fraud Studies, the Food Standards Agency’s National Food Crime Unit, Food Standards Scotland’s Food Crime and Incidents Unit and the Intellectual Property Office.
Eoghan Daly, report co-author, said despite extensive work by food and drink businesses there is no reliable information on 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’ profits and reputation but it also reflects on the food industry as a whole and more importantly risks consumers’ trust and health,” he said.
“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.”
Daly, of CIEH, said fraudsters work hard to hide their activities, making the worst and most costly scams subtle and difficult to detect.
“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.”
Fraud can take many forms, said the report, such as inclusion of contaminated substances in products, misleading claims in terms of quality or quantity or fictitious companies created to receive goods on credit who then disappear without paying bills.
Fraud can also lead to financial costs, undermine consumer confidence and potentially impact consumers’ health and well-being, it added.
Other food fraud resources include USP’s database, the Grocery Manufacturer’s Association and Battelle software tool SSAFE and PwC’s vulnerability assessment and a position paper from FoodDrinkEurope.
Fraud undermines businesses
Jim Gee, co-author, visiting professor and chair of the Centre for Counter Fraud Studies at the University of Portsmouth, said fraud undermines the financial health and reputation of food and drink businesses.
“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.”
Mitigating strategies should be part of essential processes like payroll and HR and could include ensuring counter fraud tactics are centrally managed, with sufficient authority to secure necessary changes, said CIEH.
Proactive and regular counter fraud exercises rather than waiting for problems to be reported and an anti-fraud culture which ensures robust, deterrent action is taken when issues are identified were other suggestions.
Ron McNaughton, head of the Scottish Food Crime and Incidents Unit, said those who perpetrate fraud do not recognise borders so working together is crucial.
“Ultimately it is the public that pay the price. 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.”
The British Hospitality Association and CIEH’s food community: TiFSiP are hosting a conference for food safety professionals on 15 November in London.
Meanwhile, the National Food Crime Unit (NFCU) has unveiled a guide on tackling food crime.
It explains the agency’s role in fighting the issue, how it can support industry and how industry can support it.
Food Crime Confidential launched earlier this year is a reporting facility for those working in and around the industry to report suspicions of food crime.
Andy Morling, head of food crime, said: “The food industry and the NFCU have a common interest in the UK being free from and a hostile environment to serious criminality within food production and supply.”
Morling has also explained what the unit does at events such as the BVL/JRC symposium.