Banks are ignoring the risk of fraud committed by their own employees despite investment in anti-fraud systems, accountancy firm BDO has warned.
In 2011 the value of reported fraud in all sectors hit almost £2.1bn, compared to £1.4bn in 2010, according to BDO's FraudTrack report.
BDO's head of fraud Simon Bevan said despite a fall in fraud within the financial and insurance sector, banks are focusing on external threats and ignoring the "greatest risk": their own staff.
The value of fraud in the financial and insurance sectors rose from £78.4m to £83m between 2010 and 2011, the report said.
Fraud in the sector accounted for 27% of all reported fraud in 2011, compared to 56% in 2010.
Bevan, head of fraud at BDO, said: "Financial services institutions have invested heavily in systems to prevent fraud, so the fact that reported fraud in this sector has decreased as a percentage of overall fraud suggests this approach is working, but there is still a long way to go.
"The most serious frauds, in terms of financial loss, are often committed by employees, yet most of the in-house fraud teams within banks tend to be made up of ex-police officers.
"They are too focused on external ‘criminals' dealing with credit card fraud and phishing when the greatest risk is internal with banks employees committing commercial lending, mortgage or rogue trading fraud."
In November 2011, two Barclays bankers were jailed for at least three years after siphoning £1.4m from customer accounts to fund an organised crime ring.
Tax fraud accounts for the highest percentage of cases at 36% of all reported fraud. This has grown from 15% in 2009 and 20% in 2010.
The average cost of tax fraud is £13m per case, compared to the average cost across all sectors of £5m.
The most common tax fraud is that concerning VAT. Last year, Her Majesty's Revenue and Customs deployed web software called Connect to catch businesses which had evaded VAT.
Avoids paperwork with two-step process
Investment process will use machines
Mark Sterling accused of operating a collective investment scheme without authorisation
'Increasing engagement will only favour those prepared to put in the effort'