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Fraud barometer

Fraud cases that have reached court totalling £317m were recorded in the first half of 2014, according to KPMG’s latest Fraud Barometer. The figure represents a 39 percent drop compared to the same period, last year, but the number of frauds has remained constant.

The latest cases also suggest that organisations have failed to spot a ‘changing of the guard’ as the profile of fraudsters shifts from rogue senior executives to younger individuals funding extravagant lifestyles. Analysis of the cases going through British Crown Courts since the start of 2014 shows that frauds committed by those aged 26-35 were valued at just over £62 million – an increase of 285 percent on the first half of 2013. At the same time, frauds committed by those aged 46 and over fell by 72 percent to £88 million.

One scam, by two 26 year olds, revolved around the hijacking of mobile phone accounts. The two began by creating a fake company that purchased lists containing customer details, on the pretence of marketing directly to them. They then assigned victims’ phone numbers to SIM cards in their possession by calling the network provider and posing as the account holder. Having transferred numbers to new SIMs, the fraudsters repeatedly dialled premium rate lines, only for the real customer to be billed for any calls made. Bills totalling £2.8m were amassed and their crimes were only discovered when customers complained that handsets could not make or receive calls.

Another case involved a 30 year old man who convinced his victims to invest in vintage wine, which they believed would increase in value. More than 400 people were conned into handing over sums ranging from £20,000 to £2m, yet their funds were used to purchase a Lamborghini and five-bedroom house with a swimming pool.

Hitesh Patel, UK Forensic Partner at KPMG, says: “Where once it was the jaded executive who relied on unquestioned seniority and authority to get away with dipping their hands in the till, it seems we are witnessing a changing of the guard. Today’s fraudster is younger and just at ease with using technology and data as selling promises. They rely on the assumption of the innocence of youth, whereas the reality is that many of these fraudsters are nothing more than a wolf in lamb’s clothing. It is important for UK organisations to recognise that youth doesn’t always equal innocence, as a confident and tech savvy generation comes through, adept at circumnavigating conventional controls and staying under the radar.”

Does size matter?

The latest figures also suggest that, for the first six months of 2014, the average case value was £2 million – a fall of 43 percent compared to that recorded between January and July 2013 (£3.5 million). On the face of it, this sounds like good news, the auditors say, but history shows that fraudsters tend to start with smaller schemes, to test the system, with fraud value then increasing as their confidence grows if they are not caught.

The latest data shows, for example, that the increase in volume in the £1m to £10m bracket was driven by a significant rise in insider fraud, with the number of employee-perpetrated frauds in this value range increasing more than ten-fold. One case study showing the trend for insider activity – and the youthful nature of conmen – revolved around a 24 year old bank clerk who attached a device to a computer within the branch he worked at. The device allowed fictional deposits worth £1.1m to be made into 15 customer accounts, which were then withdrawn by the customers and a colleague – all of whom had been colluding with the ring-leader.

Hitesh Patel says: “Super cases are conspicuous by their absence. Instead we are witnessing the rise of comparatively small value crimes as fraudsters try to get away with theft by hoping smaller scale activities can accumulate as they go un-noticed over time. The truth is that these crimes still leave victims in their wake and a business should ignore them at their peril. Complacency and ’it won’t happen to me’ syndrome should not be allowed to creep in to peoples’ mindset as the battle to combat white collar crime goes on.”

If it’s too good to be true …

The latest Fraud Barometer suggests that private investors are the biggest victim of fraud, the audit firm says, with 48 percent of fraud losses resulting from the false promise of a return on investment. The latest data shows a growth in the number of individual investor victims, with losses of £153 million, up from £74 million for the same period last year.

One case involved a crooked financial adviser dubbed the ‘Wolf of Old Hall Street’ who bought a fleet of supercars, invested in a racehorse and sponsored two Premier League football clubs with the proceeds of his con artistry. His scam involved the creation of a bogus investment fund for which he persuaded investors to hand over large cash sums, which he simply spent. One victim was so convinced that he parted with £3.7 million, none of which has been recovered.

Patel adds: “The economy may be improving but the pressure to see a return on investment remains acute. Investors searching for extraordinary returns are likely to remain vulnerable to conmen promising much and delivering little. It’s a sad fact, but the truth remains that if something sounds too good to be true, it probably is.”


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