Fraud hits 13-year high as downturn worsens ..UK

Fraud reached its highest level for 13 years in 2008, as individuals resorted to desperate measures to maintain their income, and companies took a harder look at their books.

More than £1.1bn of fraud came to court last year, according to KPMG's Fraud Barometer – the highest level since 1995 and the second highest in the survey's 21 years history. KPMG warns that the situation is likely to worsen as the recession deepens.

Corporate fraud increased five-fold, driving losses up to £125m. Accounting frauds were widespread, with cases worth over £145m, compared with £22m in 2007.

Philip Davidson, European head of restructuring at KPMG, said: "With falling revenues and often high levels of debt, managers of businesses may be tempted to massage figures to paper over the cracks in the hope that operational changes can be made to improve performance before creditors look more closely."

Fraud by company managers, employees and customers trebled to £300m, while crime by professional gangs remained at "extremely high" levels.

Frauds included a Midlands woman who stole £250,000 from the vending company where she worked over two years – including £70,000 in coins.

Hitesh Patel, fraud investigation partner at KPMG Forensic, said: "I fear the trend for the next couple of years will be even worse.

"As the global economic downturn takes hold and organisations look ever more closely at their operations it is very likely that more fraud will come to light so that the real impact of the credit crunch on fraud is yet to be fully felt."

In an interview in The Daily Telegraph Richard Alderman, director of the Serious Fraud Office (SFO) says it is braced to handle fraud or potential fraud cases resulting from the financial crisis following a City trawl and discussions with accountants and lawyers about the possible fall out from the market turmoil.

A raft of multi-million pound corruption cases involving allegations of illegal practices by British and foreign companies is set to be launched after extensive investigations at home and abroad.

The revamped SFO has opened a hotline for whistleblowers to provide information about alleged fraudulent activities in the City.

Mr Alderman, says he expects to take action over the next few months in what he describes as "half a dozen significant cases".

Source: The Telegraph. UK