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Fraud Barometer August 2019: UK regions

Fraud Barometer August 2019: UK regions

The story across the UK regions.

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Roy Waligora

Partner, Head of Investigations and Corporates Forensics

KPMG in the UK

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August 2019 results

Our latest results from the KPMG Fraud Barometer have just been published. The Fraud Barometer has been tracking fraud trends since the 1980s and analysis of cases has continually identified trends in the types of fraud that have dominated courts. The bi-annual Barometer identifies the latest fraud trends and patterns affecting the UK economy which helps businesses remain alert to new threats and respond to any fraud risks in an appropriate and proactive manner.

Scotland: High-value fraud cases continue to decline in Scotland

The value of major fraud cases going through the Scottish courts has continued to decline. Only four cases were heard in Glasgow, Edinburgh and Paisley in the first half of 2019, down from nine during the same period in 2018. Meanwhile, the value of the cases was also down from £1.8m in Q1-Q2 2018, to £1.2m this year. Charges included embezzlement, benefit fraud, VAT fraud and Procurement fraud. The most high-profile of this year’s fraud cases involved Margaret Fleming, from Inverkip. The former carers of the 21-year-old, Edward Cairney and Avril Jones, are awaiting sentencing after being found guilty of murdering her and fraudulently claiming £182,000 in benefits by pretending she was alive. In another case, Ian Brash, from East Lothian, pleaded guilty after he stole more than £350,000 from the Dr Robert Malcolm Trust while he was a trustee of the charity, which provided financial support to medical students. Prosecutors are now seeking more than £1.5 million from the 66 year-old retired architect, through the Proceeds of Crime Act.

“The latest data provides some reassurance that actions to tackle high value fraud appear to be paying off. However, with three out of the four cases this quarter involving people with family or employment connections, it’s clear that businesses and individuals need to recognise that fraud isn’t just an online or external threat and there remains a complex range of risks and dangers.” Graham Cochran, Forensic Director at KPMG in Scotland.

North East and Yorkshire: Value of fraud in Yorkshire and the North East drops by two thirds

Yorkshire and the North East has aligned to the national trend and witnessed a fall in the value of fraud cases heard in the region’s courts. The value of fraud cases reaching court during the first half of 2019 reached £18.2million, compared to £54.4million during the same period lastyear. The number of cases in the first six months of the year also fell, decreasing from 31 to 25. The fall can be attributed to a significant decrease in the value of management fraud –down from £37.7million to £9.1million –despite there only being two fewer cases than the eight heard in the same period last year. The decrease in value is partially due to a £21.0 million investment fraud in the first half of 2018. Professional criminals continue to be the most likely perpetrator of fraud, accounting for a third (36%) of cases heard with a value of more than £100k. However, management fraud has the highest case value –with six cases collectively contributing half of the total £18.2million.

“A fall in the value and frequency of fraud might be welcome, but we shouldn’t become complacent. Quite simply, the fight against fraudsters is far from over. The latest stats simply show that the threats that we all face are constantly changing, and so vigilance and preparation are key. Businesses remain a popular target for fraudsters, with examples of VAT fraud and embezzlement serving as a reminder that internal controls are just as important as protecting from external threats. On a national level, we’ve seen the commercialisation of cyber crime establish itself, so Yorkshire businesses should prepare and brace themselves as attacks move online and become ever more digitally enabled.” Annette Barker, Partner and Head of Consulting in the North and Sara Smith Risk Consulting Director.

North West: North West fraud drops in value by more than 50%

The North West has aligned to the national trend and witnessed a dramatic fall in the value of fraud cases heard in the region’scourts. The value of fraud activity during the first half of 2019 reached £29.2m, compared to £66.6m during the same period last year. The number of cases being brought to court in the first six months of the year remained unchanged at 26. The drop in value can be attributed to a spike in tax evasion activity in 2018, which saw a number of major smuggling cases, including bold attempts to smuggle tonnes of tobacco. The cases during that period were the most common fraud activity and had a combined value of more than £58m. Embezzlement of funds has been the most common fraud offence so far this year with eight cases, followed by VAT fraud which was the focus of five cases in the region. Meanwhile, commercial businesses were the most likely target for fraudsters and were the victims of £10.3m worth of fraud activity.

“A fall in the value in fraud might be welcome, but we shouldn’t become complacent and should remember that the volume of cases is just as high as last year. Quite simply, the fight against fraudsters is far from over. The latest stats simply show that the threats that we all face are constantly changing, and so vigilance and preparation are key. So far this year, businesses have been the main target and embezzlement the most common offence, which reminds us all that internal controls are just as important as protecting from external threats. On a national level, we’ve seen the commercialisation of cyber crime establish itself, so North West businesses should prepare and brace themselves as attacks move online and become ever more digitally enabled.” Damien Margetson, Head of Forensic at KPMG in the North West.

Midlands: Value of Midlands fraud cases rises to more than £81.6 million

The value of alleged fraud cases across the Midlands has soared to more than £81.6 million with Midlands courts dealing with 42 cases (26 in the West Midlands, 16 in the East Midlands) in the first six months of 2019, up from 38 in the first half of 2018. While the number of fraud incidents has increased, the combined value has also risen by more than £43 million. The highest value case involved Mark Mould from Featherstone, who attempted to claim a £15.3 million jackpot prize from the National Lottery. The 29 year-old was handed a 15-month suspended sentence and 12-month communityorder, after admitting attaching two separate tickets together before contacting Camelot to fraudulently claim the prize money. The biggest victims of high value fraud in the Midlands are businesses, with 11 cases accounting for almost £48 million, and the Government, with a total of 16 cases valuedatmore than £22.6 million. In one case, business owner Carol Hudson was jailed for two years and disqualified from being a director, after she was found guilty of bribery. The former owner of ALCA Fasteners in Darlaston paid nearly £300,000 to an employee of the Wurth Group, over a period of five years, securing more than £12 million worth of lucrative contracts.

“With the number of alleged fraud cases coming to court in the Midlands increasing there is also a worrying rise in the value of cases, particularly those targeting and involving the business community. It’s clear that businesses need to be more prepared than ever before for the risk both within and outside their organisations. Criminals are becoming increasingly more sophisticated in their approach, so companies of all sizes and across all sectors must ensure they develop a robust, preventative strategy to avoid becoming the victims of professional scammers.” Julie Bruce, Forensic Director at KPMG in the Midlands.

South West: South West aligns to the national trend with drop in value of fraud cases seen

The South West has aligned to the national trend, with the value of fraud for the first half of 2019 falling to £3.3m compared to £13m this time last year. The number of fraud cases taken to court so far in 2019 has also dropped, with just 10 cases, compared with 21 last year. Fraudulent activity in the South West has typically been carried out by employees of commercial businesses, accounting for 40% of cases. This paints a different picture to this time last year, when the primary target was government organisations, totalling only 20% of cases in the region this year. Professional criminals are responsible for the highest value fraud, with just two cases totalling a third of the value of fraud taken to courts so far this year.

“There has been a significant drop in fraud being carried out against government organisations compared to this time last year, and career criminals have taken a back seat in terms of activity in the South West. However, just two sophisticated scams by professional criminals have resulted in more than £1m worth of fraud. We’re continuing to see an increase in employees in the region defrauding their employers to fund their lifestyles –most commonly by transferring cash electronically. These scams haven’t always been hugely sophisticated, and serve as a reminder to businesses to strengthen their core controls as well as considering new or more sophisticated external threats.” Damian Byrne, Forensic lead for KPMG in the South.

Wales: Wales sees fewer, higher value cases of fraud

Wales has seen the number of fraud cases taken to court fall compared to this time last year, but the value per case has increased significantly. 12 cases totalling £9.8m have been taken to courts in Wales so far this year, compared with 20 cases totalling £9m last year. There has been a significant drop in the number fraud cases against commercial businesses and government organisations, with the general public making up half of victims in the cases in Wales in the first half of 2019. However, the only Government fraud case has accounted for nearly half the total fraud so far this year (£4.7m). Professional criminals continue to be the most likely perpetrator with their sophisticated scams accounting for five of the cases, closely followed by managers. Managers have duped organisations out of larger sums of money totalling £6.9m worth of fraud, compared to £2.2m by professional criminals.

“It’s a concerning trend to see the rise of criminals targeting vulnerable members of the public, including close friends and family. Whilst government organisations and commercial businesses have taken steps to counter fraud threats, the risk of fraud will always exist, as seen in the high value cases still coming to court this year.” Damian Byrne, Forensic lead for KPMG in the South.

South East: £82 million fraud in South East carried out by professional criminals Over £82 million of alleged fraud was carried out in the South East by professional criminals in the first half of 2019. 94 cases of alleged fraud in the South East region were recorded, with nearly half of the cases being carried out by professional criminals. Employee fraud accounted for 21 cases and £13 million.
Fraud attacks involving the general public across the region accounted for 19 cases totalling nearly £30 million and there were three cases in the region carried out by family or a close friend accounting for £780, 000.

“Ruthless professional criminals, often using new technology, have driven a surge in fraud targeting consumers. These gangs are often well organised and will take advantage of individuals, seeing the value in committing smaller frauds in large volumes. Consumers and businesses also need to be aware of the threats presented by professional fraudsters and to the potential of falling victim to sophisticated scams. In particular, as more fraudsters turn to technology in order to target their victims, consumers and businesses need to be vigilant to the potential of valuable data falling into the wrong hands and the damage that can cause.” Damian Byrne, Forensic lead for KPMG in the South.

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