In 2010, the UK fell victim to more fraud cases than ever before, with the Government bearing the brunt of the attack – the KPMG Fraud Barometer suggests.
In fact, 42 per cent of all cases were levelled at the public purse, totalling £571m. This was an increase of nearly 20 per cent, from 59 instances in 2009 to 70 in 2010. One of the largest cases was worth £103m, in which a 48-year-old man claimed a flood of fraudulent bids for tax breaks on research into green technologies.
At the audit firm, KPMG forensic partner Hitesh Patel said: "Government agencies, like commercial businesses, have been increasingly vulnerable to the threat of fraud. In a year of austerity measures implemented by Government, tax increases, the threat of rising unemployment, and significant structural change it is hardly surprising that the long fingers of the fraudster have reached into the public purse.”
"Fraud is not a victimless crime, particularly at a time when the country deficit is so high. Anti-fraud measures need to be reviewed and amplified by the public sector to combat this assault,” he added.
In fact, Government is now making £900m available over the spending review period to raise additional revenues from those who undermine the tax system. They have estimated that this should bring in around £7billion per annum, by 2014-15, in additional tax revenues. The volume of UK fraud cases snowballed in 2010, with 314 incidents reported (total value of £1.374bn), the highest level ever recorded in the 23-year history of KPMG’s Fraud Barometer. This was up 16 per cent on the previous year (271).
"Businesses trying to survive and individuals seeking to maintain lifestyles by whatever means will have undoubtedly driven the numbers up – it is are these same vulnerable groups that will have been the prey for professional criminals,” Hitesh said.
Management remained unchecked during 2010, as fraud increased in this group by 20 per cent year-on-year, to £419 million. Being in a position of trust and authority enabled management to cause greater financial damage than employees – i.e. 61 cases totalling £419m in 2010 compared with 79 cases totalling £129m respectively.
The biggest case over the last 12 months was worth £200m – in which a director of a City firm transferred large sums of taxpayer money out of the country. He then went on to set up a currency exchange business to help more than 100 criminal clients clean up the proceeds of their fraud.
However, professional criminals remain the biggest threat to the UK, being largest group of perpetrators of fraud, recording a total of £709 million in 2010 (51 per cent) compared to £718 million in 2009.
Hitesh said: "Professional gangs are the chameleons for the fraud world: constantly changing their colours to constantly creep one step ahead of technological development, exploiting business evolution for nefarious ends.”
In tune with iTunes
Determined fraudsters continue to adapt and exploit new technology, as one case in the Midlands demonstrated, where a DJ was accused of plotting a credit card scam on the iTunes website. Both the man and his ten accomplices targeted the Apple and Amazon sites with 20 songs which they then sold through the respective websites. It is thought that they then stole about 1,500 credit cards to buy the songs, and then claimed back just under £469,000 in royalties.
Hitesh said: "The online universe has opened up a whole new world for innovative fraudsters. While credit card and data theft remain common tools from which they are able to profit, the need for ever more effective techniques to combat fraud grow greater by the day. Unfortunately anti-fraud measures do not always keep pace with professional criminal activity.”
Mortgage fraud, which was rife in the first half of 2010, plummeted, from July to December, dropping from 21 to 13 cases (£96m – £12.4m) suggesting the bigger, more organised mortgage fraud is being tackled head on by the financial institutions.
