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The surge in fraud recorded in the second half of 2005 has continued unabated into 2006, with more fraud (£653m) in six months than in the whole of most recent years, according to KPMG Forensic’s Fraud Barometer.
The research, which for the last nineteen years has considered major fraud cases being heard in the UK (charges of over £100,000 in the Crown Court), saw 123 cases reaching court worth £653m, compared to 88 cases worth £250m over the first six months of 2005.
The value of frauds prosecuted was boosted by some large ‘super-cases’, such as a £200m prosecution over the collapse of investment company Imperial Consolidated and a £100m case over alleged attempts by a number of companies to defraud the NHS through a drug price-fixing scam.
Jeremy Outen, partner at KPMG Forensic, said: “Unfortunately, fraud seems to be reaching new heights right now, although we can take some comfort from the fact that more cases are being successfully brought to court. However, the figures mask the true cost of fraud, which is borne by us all. It was encouraging to see the Attorney General recommending a coordinated national strategy for dealing with fraud in his recently-published Fraud Review – the challenge will be making it really work in practice.”
Insider fraud
Worryingly, the boom in insider fraud has continued. Management was the biggest perpetrator of frauds, accounting for approaching half (£310m) of frauds coming to court. Fraud by professional gangs fell back somewhat from the previous six months however – while it accounted for nearly half of fraud in 2005, in the first six months of 2006 it accounted for less than a quarter of prosecutions at £123m.
A typical example of a managerial fraud was the prisons payroll boss from Thornton Heath in Surrey who created fictitious employees so she could pocket more than £180,000 and start a new life for herself in Jamaica. Another case saw a construction company director steal some £400,000 by simply writing cheques to himself, undercharging customers in return for cash and racking up personal expenses on his company credit card.
Bank insider fraud
There was a proliferation of cases of insider fraud within banks – most notably the case of the bank manager in Scotland who, in one of Scotland’s biggest ever frauds, created £21m in false loans over a period of five years. Many bank insider frauds were carried out by low level employees, sometimes connected to organised criminal gangs – such as two call centre employees in Yorkshire who were part of a nationwide fraud ring that used customer credit card and bank details to swindle almost £900,000.
Victims
The biggest victims of fraud were investors (£267m) followed by government (£218m). The bulk of the investment fraud was through the Imperial Consolidated collapse, however, meaning the government was once again the most common target, through the habitual array of tax evasion, VAT and benefits fraud cases. One prosecution for carousel fraud – the non-payment of VAT on the sale of high cost highly portable items such as mobile phones and computer chips – was worth some £57m alone.
Geography
London remains the hotbed for the highest value frauds. Over 80 percent of frauds by value (£540m out of £653m) were committed in London and the South East. However, London only accounted for one third of the number of frauds committed, indicating that fraud is widespread across the country but tends – with some significant exceptions – to be of lower value in the regions.
Identity frauds
Identity theft or deception was behind many of the frauds that came to court over the last six months. These included the Tunisian who took the identities of millionaire businessmen from magazine rich-lists to obtain credit cards in their names and rack up some £500,000 of spending in luxury hotels and stores around the world. Another serial conman tried to swindle Christie’s out of more than £1m worth of art by posing as a rich professor and attempting to get the pictures shipped to America. 12 imaginary children enabled one asylum seeker to fraudulently claim over £140,000 in benefits, whilst a Somerset trader reclaimed nearly £1m in VAT for 425,000 non-existent sheep which he claimed to have bought from a dealer in Spain.
Meanwhile, the fact that past performance is not necessarily a guide to the future was underlined in the case of a former Young Businessman of the Year for Wales who was sentenced to four years in prison for an investment fraud which saw more than 100 people lose £900,000 between them.
Jeremy Outen said: “Fraudsters are characterised by greed, determination and ingenuity. It is not easy to stop them – which is why companies need to keep on reviewing and refining their systems of controls, and as individuals we all need to take care in making sure that we know who we are dealing with when asked for personal information and data.”
•Date: 4th August 2006• Region: UK •Type: Article •Topic: BC general
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