Fraud cases totalling over £516m nationwide were recorded in the first half of 2013, up over a third on the previous year’s £374m, with the average value of cases jumping from £2.8m to £3.5m, according to KPMG’s latest ‘Fraud Barometer’.
A sinister theme has played out this year, with professional criminals becoming the biggest perpetrators – responsible for frauds totalling £290m, up from £110m in H1 2012. One of the key drivers for this has been supply chain frauds worth £61m (up from less than £1m in 2012). In addition to financial cost, these cause human harm.
Yorkshire’s Crown Courts dealt with 14 £100,000+ frauds in the first half of 2013, totalling £13.8m, up two-thirds on the same period last year.
Cases included:
An oil trader who ran his business from Malton near York, jailed for defrauding investors of £1.3m after fabricating statements when his fund began losing money; and a bank call centre employee who diverted £250,000 of a customer’s mortgage advance into the account of an accomplice.
Vivien Osborne, Forensic director at KPMG in Leeds, says:
“While the back end of last year saw a resurgence of traditional con-artistry, this year has seen fraud cases turn a darker corner with professional criminals acting across borders, defrauding largely governments and financial institutions. The increase in the corruption of supply chains by fraudsters has been marked. In one particularly shocking case, a company sold fake bomb detectors to Iraqi authorities, at a financial cost of £55m, but the real damage was human injury and suffering. The risk to safety and therefore life through supply chain fraud can have serious operational and reputational consequences which often get overlooked as a result of financial impact being a primary focus.
“While procurement functions seek to do relevant due diligence checks on potential suppliers, fraudsters are increasingly getting smarter at circumventing traditional procurement processes and controls. Organisations need to make the most of the numerous data sources available and overlay that with the information they have on a third party they plan to do business with. Joining up the data is a key tool in building a more informed picture to prevent risks crystallising to such an extent that it causes damage to consumers and organisations.”
Fraud committed against investors also saw a huge increase in 2013, with frauds totalling £74m coming to court. Vivien Osborne went on to say:
“Honest investors are being defrauded as people are feeling compelled to seek alternative ways to maintain lifestyles with pensions, traditional investments and incomes squeezed at the same time as inflationary pressures driving up costs.
“Unfortunately the public is vulnerable to ponzi schemes dressed up as legitimate investment opportunities in the form of oil trading, wine clubs and property investments, which really are too good to be true. We note that the Financial Conduct Authority is moving to regulate alternative asset classes which may mitigate the problem but the public should still be alive to the threat of investment scams.”
The latest data shows that governments and financial institutions are really bearing the brunt of the cost of fraud with £405m suffered in 2013 compared with £271m in the same period in 2012. One of the main drivers for the losses to financial institutions was loan and mortgage fraud, up from £59m in 2012 to £162m this year.
“Fraud is on the up and remains a huge cost to the public and private sectors. It is a welcome development to see the government continue its fight against white collar crime with a severe punishment regime being proposed in the sentencing guidelines consultation paper issued recently. This acknowledges that the real cost of fraud is more than just financial,” commented Vivien Osborne.
In line with overall national crime statistics, the data shows that fraud is overwhelmingly committed by men, with 86% of frauds by value in 2013 committed by men, and by people over 35 (responsible for 95% of frauds by value in 2013).
