Level of mortgage fraud increases
MORTGAGE fraud almost quadrupled in value during the first six months of 2010, according to KPMG’s latest Fraud Barometer.
In the first six months of 2009, mortgage fraud cost banks and building societies £24m. The total for last year was £77m.
However, lenders faced a bill of almost £96m after the first six months of this year, the research found.
Vivien Osborne, a director in KPMG’s forensic team in Yorkshire, said: “The fact that increasing amounts of mortgage fraud are being prosecuted is cold comfort for the financial services industry. It is highly probable that the issue is far bigger than our figures demonstrate and more will come to light.
“This is a legacy issue for the banks from the pre-recession boom years when house prices inflated, providing the opportunity for fraud.
“Banks will be hoping that they have uncovered most of their fraudulent loans but the trend remains upwards and it could be some time before we see the peak.”
Mortgage fraud accounted for over half of all fraud committed against the financial sector in this period, KPMG found.
In Yorkshire 18 cases representing £25m of large scale fraud reached court in the first half of the year; a 19% increase compared to the first six months of 2009, when it totalled £21m.
Cases included a £13.6m fraud within a trading standards unit, involving false accounting, and a £2m evasion of excise duty through an illegal fuel operation involving hydrocarbon oil.
Overall, the Fraud Barometer, which considers serious cases of fraud with charges in excess of £100,000 in the UK courts, found 166 cases of serious fraud in the first half of this year – the highest number of cases in a six month period in the Barometer’s 22 year history.
The cases had a total value of £608.5m – down 4.3% for the same six month period in 2009.
However, the 2009 figures were inflated by one case worth £200m on its own
Ms Osborne added: “While interest rates remain low, it’s unsurprising that investors who are looking for new ways to grow their capital remain susceptible to being targeted by fraudsters.
“At the same time, professional criminals show themselves to be highly adaptable and always looking for new scams. As soon as one avenue is blocked, they will move on to another one, so it is important for investors to remain vigilant.”
The Fraud Barometer also demonstrated the importance of ensuring that companies have mechanisms to prevent fraud and detect misconduct effectively, she said.
“Companies who took fraud risk management seriously before the downturn should now be stronger because of that.
“The discipline that they have subjected their businesses to should help them gain a competitive advantage while their competitors get distracted in their reactive combat against fraud and misconduct as the economy recovers.”
