Every charity, NGO and not-for-profit is susceptible to fraud and cybercrime by criminals exploiting the current global crisis.
Cost of Fraud to Charities

According to the Charity Commission, fraudsters stole £3.5m from charities during the pandemic in 2020 – with 645 incidents of fraud and cybercrime being reported in a six month period1.

Whilst this is mostly in line with the level of fraud identified in 2018 and 2019, the sector shouldn’t become complacent or accept this as the ‘norm’. With a range of environmental, economic and political events impacting many charity’s abilities to raise funds over the past two years, could you continue to operate should a fraudulent attack take place within your organisation? With Charity Fraud Awareness Week having taken place on 18-22 October 2021, we take look at what makes charities such an attractive target to fraudsters and what you can do to become fraud aware.

What makes charities vulnerable to fraud

With an annual income of nearly £76 billion2, the sector is an attractive target for both organised crime gangs and opportunistic fraudsters. But what makes charity, NGO and not-for-profit organisations so vulnerable to fraud? The Charity Commission3 summarises the main causes:

  • Charities have high levels of public trust
  • They often rely on the goodwill and support of employees and the notion that ‘no one would abuse a charity’
  • Small finance teams often result in a lack of scrutiny and division of duties
  • Having high levels of cash income that naturally fluctuates
  • Using volunteers may also make it more difficult to ensure financial controls are maintained consistently

How charity fraud happens

A joint survey by the Charity Commission and The Fraud Advisory Panel found that alarmingly, fraud by trustees and volunteers had doubled over a ten year period from 2009-20194 - with most frauds being small in value and occurring over a relatively short timeframe. Here are some examples of how both internal and external fraud can take place:


  • Fraudulent cheques – that maybe have been altered before it’s paid (i.e. altering the name on the cheque or even the amount)
  • Intercepted cheque or cash donations before they are paid into the charity’s bank
  • Misuse of credit cards by staff
  • Staff falsely claiming expenses
  • Inadvertent human error through email, file sharing or USB sticks


  • Fraudulent cheques and false invoices - that are often manufactured or printed on non-bank paper to look exactly like genuine documents
  • Identity fraud by hijacking bank accounts or phishing emails
  • Card-washing schemes
  • A contractor under-delivers or over-charges for goods or services
  • Database hacking or theft

A more comprehensive list of potentially fraudulent activities can be found in the Charity Commission’s Compliance Toolkit – Fraud and Financial Crime.

How to spot the warning signs

So, if fraud is something you are likely to face as a charity, how can you spot the warning signs? Most internal fraud exposures can be mitigated through internal controls and audit processes, so segregation of duties and dual controls being in place to release monies are good ways to minimise these risks. Also, be sure to look out for changes in people’s behaviour. People commit fraud for a number of reasons including greed, boredom or debt, so a change in mannerisms could be another giveaway.

Preventing fraud in your organisation

The good news is there are a number of things you can implement within your charity to aid prevention, for example the Charity Finance Group’s guide, ‘Essential Charity Finance for Trustees’ suggests instilling a culture of ethical behaviour, raising awareness of social engineering fraud, developing an anti-fraud policy and implementing robust financial controls, amongst others.

However, sometimes despite your best efforts, you can still fall victim to dishonest activities. Some charities still believe that insurance is too expensive for them, or that the chance of being a victim of fraud is so remote that the premium required just isn’t worth it. Given the current levels of fraud and the variety of ways that fraud can hit a charity it may now be time to reconsider this.

There are two types of insurance available: Fidelity Guarantee or Employee Crime for internal fraud only, and Crime Insurance for both internal and external fraud. Fidelity Guarantee was the first type of cover available and has been around for over 40 years. It offers protection and compensation should a charity be defrauded by its finance director, an employee, volunteer or trustee. The wider Crime cover extends to cover fraud involving third parties such as the public, organised crime, temporary workers and anyone else who is not part of the charity.

The importance of a specialist broker

A specialist charity risk and insurance broker can support you by working collaboratively with you and your insurers, using specialist risk management teams to deliver protection to meet your needs.

If you don’t yet have a relationship with Gallagher, we can conduct a confidential review of your current insurance programme arrangements and organisation’s exposures, including those concerning fraud. We can then work alongside you for renewal to help ensure you secure cover that is sufficient for your needs in this challenging market.

1. https://www.civilsociety.co.uk/news/charities-have-lost-millions-to-fraud-during-pandemic.html
2. https://www.thirdsector.co.uk/insider-fraud-charity-sector/article/1464773
3. https://www.gov.uk/government/publications/focus-on-insider-fraud-in-charities
4. https://preventcharityfraud.org.uk/document/preventing-charity-fraud/

This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note we have relied on information sourced from third parties and we make no claims as to the completeness or accuracy of the information contained herein. It reflects our understanding as at 05/10/21, but you will recognise that matters concerning COVID-19 are fast changing across the world. You should not act upon information in this bulletin nor determine not to act, without first seeking specific legal and/ or specialist advice. Our advice to our clients is as an insurance broker and is provided subject to specific terms and conditions, the terms of which take precedence over any representations in this document. No third party to whom this is passed can rely on it. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to fullest extent permitted by law. Should you require advice about your specific insurance arrangements or specific claim circumstances, please get in touch with your usual contact at Gallagher.