- Cheque fraud incident is one of the largest cases in past year
- High volume of lower value frauds in contrast with previous years - 96% of cases under £10m
- First corporate Anti-Bribery & Corruption Act case comes before Courts
KPMG’s bi-annual Fraud Barometer has shown a high volume of fraud cases prosecuted in the past year but at much lower value levels than recorded in previous years – the average case value this year being £2.9m, compared to £6.1m, over the last five years. The report also shows that while fraudsters are at the cutting edge of technology - attacking banks in the virtual world for example - some have reverted to ‘paper and pen’ as organisations focus efforts on technology-driven defences.
Hitesh Patel, UK Forensic Partner at KPMG, says: “It is certainly the case that we have seen fraudsters using very clever high tech frauds to attack banks, businesses and local authorities, but we have also seen some of the biggest frauds in more low tech scams. As old forms of transactions, such as cheques, are phased out, organisations are focussing on developing sophisticated lines of defence. Yet, rather than putting criminals off, many fraudsters are ignoring the challenge of triumphing over technology in favour of using simpler methods of deception.”
Old fashioned habits die hard ...
The data shows that con artists still rely on ‘old technology’ to perpetrate fraud, with a number of schemes in 2013 based on counterfeit cheques. In one strikingly simple case a local government employee processed cheques for legitimate payees, using disappearing ink. She secured the signatures of senior management for cheques reaching a total value of £162,000 and waited for the ‘payee’ details to disappear before substituting them with her own name.
In a case worth £20 million a businessman paid a series of worthless company cheques into an account based in the UK. He, and the gang involved, succeeded in transferring three-quarters of the funds into a foreign account before suspicions were raised and the account was frozen.
Another case involved a conman who attempted to buy £1 million of cars by visiting dealerships on six occasions, paying for an Aston Martin, Maserati, Ferraris and a Bentley by cheque. He was caught when the cheques bounced and one of the dealerships visited his home to reclaim the vehicles.
Fraudsters’ determination to focus on the so-called old-fashioned scams and avoid elaborate methods of deception is also evident through a resurgence of cases involving tax rebates, loans and mis-selling. Combined, the three forms of fraud totalled more than £343 million – up from £41 million in the previous 12 months. It shows that, although the motivation to deceive comes in a variety of forms, many criminals are still prepared to rely on the traditional conman artistry of making financial gain through misplaced trust, attacking people’s vulnerabilities and sensibilities.
But the virtual world is becoming a home to fraudsters...
Meanwhile, there were cases where banks and businesses were attacked online, with fraudsters using computers, turning to robotics and malware in an attempt to avoid detection. One example involved eight people, arrested in connection with a £1.3 million theft by a gang who took control of a bank’s branch computer system. They had placed a ‘keyboard video mouse’ and 3G router to one of the computers inside the branch when one of the fraudsters posed as an engineer, saying he was there to fix computers. The ‘fix’ enabled the gang to control computers remotely using code and surveillance to find holes in organisational cyber defences and transfer money into different bank accounts.
In another case fraudsters posted fake adverts for work at Harrods on a website as part of a £1 million scam to trick desperate job hunters of their savings. The con involved writing 'Trojan' malware which was hidden in job application pack downloads posted on the free website Gumtree. Once embedded on computers, the software copied bank log on and security details of those seeking work, before forwarding them on to the criminals who netted in excess of £1 million.
Bribery and corruption on the radar
Despite organisations seeing a decline in internal cases of fraud, the latest Fraud Barometer highlights the first prosecutions under the UK’s Anti Bribery and Corruption legislation. In a case adding £23 million to the total figure in this year’s Fraud Barometer and relating to the purchase of 6,000 hectares of land in Cambodia purchased through senior military officials based in the country, three senior executives have been charged with making and accepting a financial advantage in breach of the Bribery Act. As well as focusing on how they were able to purchase the land, the case examined whether the company mis-sold bio-fuel investment products, after the authorities were alerted to the possibility they were providing false information to clients.
Patel concludes: “The pressure to compete lies at the heart of attempts to bribe and corrupt and the old adage of every person having their price is now much more likely to trigger criminal repercussions. The UK has seen its first corporate prosecution under the new anti-bribery legislation, and with it widely known that other cases are in development, fraudsters may begin to fear the ramifications of being caught. If guilty verdicts are returned and heavy punitive measures imposed, perhaps we will start to see people thinking twice before attempting to corrupt others in the pursuit of unfair advantage. ”
Lucinda Kemeny/Jade Neal/Lorena Sanchez/ Gareth Rice-Jones, , MHP Communications
Tel: 0203 128 8758/ 8215/ 8549/ 6023
Notes to Editors:
The latest KPMG Fraud Barometer measures fraud cases in the UK from 01 January 2013 – 31 December 2013, and considers major fraud cases being heard in the UK’s Crown courts where the charges are in excess of £100,000.
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with approximately 11,500 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2013. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 155,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.