Serious fraud cases totalling £1.3bn ($2.1bn) reached the courts last year – the highest for 22 years – including mortgage fraud, which doubled, according to figures released on Monday.
The latest KPMG Fraud Barometer, which has been compiled each year since 1987, showed that last year 31 cases of mortgage fraud totalling £77m reached court compared with 25 cases worth £36m in 2008 as falls in the housing market have exposed scams such as buy-to-let properties being acquired by criminal gangs.
KPMG predicts that increasing amounts of mortgage fraud will come to light in the wake of the end of the property boom and as lenders increasingly scrutinise their mortgage books and reclassify their mortgage asset portfolios.
The study also showed that fraud cases have risen significantly in the past decade, where 1,750 cases of serious fraud totalling £7bn reached the courts compared to 700 cases totalling less than £5bn in the 1990s.
There has been a steep change in the number of fraud cases during the past five years where annual fraud figures have been running at around £1bn a year.
KPMG said that there was a jump in the number of cases coming to court last year that involved frauds by company managers – some £335m of cases were heard by the courts compared to £129m in 2008. However, organised criminal gangs continue to be the biggest perpetrators of fraud and are responsible for £719m of scams.
The government and public sector were the biggest losers , with £476m stolen in tax and benefit frauds ,although banks and other financial companies, which lost around £396m, were also major targets for fraudsters.
Hitesh Patel, partner at KPMG Forensic, said: “Britain appears to have a rising fraud problem, as is evident by looking at the steady increase through the last 10 years. The credit crunch will undoubtedly make the situation worse, and we are yet to see the full impact of it. The forecast therefore is: getting worse. The comfort, if there is any, is that more fraud cases are successfully being brought to court.”
He said that companies had become better at detecting fraud and there is a greater emphasis on corporate governance although fraudsters were becoming more sophisticated.
He said that globally there had been an increase in “superfraud cases” such as Bernie Madoff’s Ponzi scheme in the US, although the UK had yet to see a similar case. He added that advances in technology were helping criminal gangs execute larger fraud schemes.
“Over the last 10 years, the boom in technology has acted as a catalyst for a boom in fraud,” he said. “Computerisation and globalisation have made fraud easier, quicker to carry out and easier to conceal. Organised criminals in particular have taken advantage of this. Identity theft is a continual problem, alongside more ‘traditional’ frauds including insider trading and price-fixing cartels. The authorities in turn have sought to professionalise the fight against fraud in response.”
KPMG singled out a number of unusual cases including one fraudster who printed his own banknotes. Here a Scottish IT professional printed around £185,000 in fake notes and involved two of his sons in the scheme. When caught, he reportedly claimed that he was undertaking a business venture to create a banknote that could not be copied. But he was found guilty and jailed for over five years.
It also pointed to another case which could act as a warning ahead of London staging the 2012 Olympics, which centred around an alleged £5m racket involving selling non-existent Beijing Olympics tickets online.
The past year also saw continued fraud within accounting and book-keeping departments – 33 cases worth a collective £44m came to court in 2009. Many of the fraudsters had worked for their victims for years and were trusted by their employers. Several cases involved people with prior convictions, such as an accountant at a Birmingham-based property management company who took more than £350,000 from his employers by transferring money from clients into accounts in his own name. He already had a history of committing theft and deception under a different name.
Mr Patel said: “It is essential for companies to rigorously screen potential employees and carry out proper background checks. Knowing who you employ and the extent of any risk they pose to the organisation is a key line of fraud defence.”
Source:- The Financial Times, www.ft.com, By By Jane Croft, Law Courts Correspondent
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