Fraud set to worsen despite reaching record levels

THE ‘naughty noughties’ has cost Yorkshire dear with the region recording nearly £30m in fraud last year alone.

According to KPMG’s latest Forensic Fraud Barometer 2009 saw fraud levels peak at a record £1.3bn across the UK – the highest in 22 years.

While there were just 700 cases amounting to £5bn in the 90s the noughties saw 1,750 cases totalling to £7bn.

In Yorkshire the decade was rounded off with 29 cases of serious fraud totalling £29.5m.

Cases to appear in the region’s courts in the last six months include convictions for a £500,000 mortgage fraud by a bank customer who was assisted by a mortgage broker, accountant and solicitor and a £3,265,000 ‘asset stripping’ business fraud, which resulted in the collapse of three Sheffield companies and the loss of 46 jobs.

Another case was a businessman in Grimsby who defrauded creditors of £280,000 before being made bankrupt.

Vivien Osborne, director in KPMG’s Leeds Forensic practice, said: “The last decade I am afraid could certainly be dubbed the ‘naughty Noughties’.

“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.”

However, Ms Osborne said that it was comforting to know that more fraud cases were successfully being brought to court.

“This is the result of a combination of factors,” she said.

“Companies have become better attuned to the signs of fraud, there has been a greater focus on corporate governance and new laws and regulations to combat fraud have been introduced.”

She continued: “Nevertheless, what we see remains only the tip of the iceberg. Despite great efforts made to tackle white collar crime, companies will need to remain vigilant as the problem will never be eradicated. Fraudsters will only get more sophisticated.”

Last year saw the highest number of cases of serious fraud by managers and employees (123) since the Fraud Barometer began.

There was saw a major increase in fraud by company managers coming to court with £335m of cases compared to £129m in 2008.

Employees also racked up far higher losses with cases worth £232m – more than double the £100m figure for 2008.

The biggest perpetrators of fraud were organised criminals, however, with £719m of fraud, though this was down somewhat from 2008 when they accounted for over £800m.

The hardest hit sector was the Government and public sector organisations, who suffered frauds to the value of £476m – mainly in the form of tax and benefit fraud – more than double the £207m figure for 2008.

Financial institutions remained a major target with cases worth nearly £396m – slightly up from £388m the previous year.

Ms Osborne said that computerisation and globalisation had made fraud easier to conceal and quicker to carry out.

“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,” she said.

“The authorities in turn have sought to professionalise the fight against fraud in response.”

However, with 33 cases worth a collective £44m being attributed to accounting fraud in 2009 extra vigilance is recommended.

“It is essential for companies to rigorously screen potential employees and carry out proper identity checks. Knowing who you employ and the extent of any risk they pose to the organisation is a key line of fraud defence,” Ms Osborne advised.