The research, published as KPMG Forensic’s Fraud Barometer,
counts major fraud cases being heard in the UK (charges of over
£100,000 in the Crown Court). It saw 222 cases reaching court over
the course of 2005, up from 174 cases in 2004.
The past six months have seen an explosion of fraud case
prosecutions, many of them high value. Whilst there were 88 cases
worth £249 million in the first six months of 2005, this shot up to
134 cases worth £693 million in the second half of the year. One
case, involving fraudulently acquired loans by metals trading
company RBG Resources plc, was worth some £260 million alone.
The Government remains the main victim of fraud
(£447 million), largely through attempts at tax evasion, VAT and
benefits fraud, while fraud against financial institutions – card
fraud, identity fraud, false cheques – has spiralled dramatically,
up from £37 million in 2004 to £360 million in 2005.
A little under half of fraud was carried out by professional
gangs (£420 million), but even more was the result of ‘insider’
fraud by management or company employees (£468 million). The bulk
of this was fraud by individuals at management
level – such as the medical centre practice manager who
awarded himself some £400,000 in extra salary payments over a
period of seven years.
Jeremy Outen, partner at KPMG Forensic, said:
“There has been a worrying boom in fraud in
recent months, although the good news is that we know this because
the fraudsters are being successfully brought to book. Criminal
gangs appear to be very active with aggressive stings, while in the
private sphere internal frauds to fund excessive lifestyles or to
pay off burgeoning debts shows no sign of abating. With both the
number and the average value of frauds increasing, companies and
individuals need to be more watchful than ever.”
The year has been notable for the number of carousel or VAT
fraud prosecutions, involving high cost highly portable items such
as mobile phones and computer chips. Two of the biggest cases, both
involving mobile phones, were worth £58 million and £40 million
respectively. Money laundering cases have also been prominent,
commonly for laundering drug money. One of the largest cases, in
the South East, saw the perpetrator jailed for four years for
laundering £12.5 million worth of drugs cash.
Other cases against financial institutions include instances of
an employee feeding information or sending funds to outside
accomplices. Two such cases in the last sixth months were between
them worth nearly £1 million. The issue of employees placed or
groomed by criminal gangs is one that has been flagged in recent
months by the Financial Services Authority.
Identity fraud continues to be rife, as
fraudsters seek ways around the tighter controls introduced by such
measures as chip and PIN. Phishing scams on the
internet are a common way of obtaining people’s identities and bank
details, such as one scam where nearly £200,000 was stolen from 160
people who were fooled by a bogus eBay auction site. In another
internet scam, a man pretending to be an official internet
registrar ‘sold’ businesses and individuals fake internet domain
names and addresses to the tune of £1.5 million – all from the
comfort of his own bedroom.
Other ID frauds have been more bizarre, such as the
ex-horseshoe fitter who posed as a pioneering
biochemist with a new process for making soap, who successfully
swindled businesses and local authorities out of £60,000 in grants
and loans, and nearly got away with £140,000 more.
As well as debt or greed, much individual fraud is motivated by
addiction, commonly alcoholism or gambling habits. But some are
motivated by more peculiar obsessions, such as the town hall
cashier in Lincolnshire who stole over £550,000 in car parking fees
to fund her Elvis Presley obsession. Spending a fortune on rare
Elvis memorabilia and recordings, she went undetected for nearly a
decade.
Jeremy Outen said: “All too often, insider frauds are conducted
over a period of months or even years without anybody noticing. It
is often the most unassuming or trusted person that is perpetrating
a fraud. Indeed, it is getting into a position of trust that can
create the opportunity and temptation to steal in the first
place."
He called for companies to review their internal
controls processes where appropriate, and make more use of
some of the extremely sophisticated fraud detection
software packages that have been developed. "These can
help identify anomalies in a company’s data flow and email traffic
that could be the possible indicators of fraud,” he said.
Fraud committed in 2005 is the highest since 1995 (£1.2 billion)
and the second highest recorded since KPMG Forensic’s Fraud
Barometer began back in 1990.
