Risk news

Figures out today have revealed a proliferation of fraud committed by managers this year, accounting for almost half of all such crime dealt with by the courts.

Analysis of the major fraud cases uncovered allegations amounting to ¿653 million in the first six months of 2006 compared to just ¿250 million in the same period last year.

Accountants KPMG's regular Forensic Fraud Barometer, which takes into account allegations involving ¿100,000 or more, recorded 123 cases in the first half of 2006 compared to 88 in the same period of 2005.

KPMG said the figures had shown a boom in insider fraud, overshadowing that directed by criminal gangs - which accounted for less than a quarter of prosecutions (¿123 million), compared to around a half in previous studies.

Among alleged perpetrators, management accounted for just under ¿310 million and other employees just under ¿22 million of the ¿653 million total.

One example cited was the case of a payroll boss accused of creating bogus employees so she could pocket more than ¿180,000 and start a new life in the Caribbean.

Non-existent sheep
Scams to fuel gambling addictions also featured heavily among the cases coming to court, such as one of a book-keeper accused of stealing ¿1 million from the firm where he worked to gamble on the internet. Identity theft was also a feature, with a series of cases involving bogus identities created to swindle cash.

Perhaps the most unusual involved animals rather than people - a trader accused of reclaiming nearly ¿1 million in VAT for more than 400,000 non-existent sheep.

London remained a "hotbed" for the highest value frauds, according to KPMG. Over 80% of frauds by value (¿540m out of ¿653m) were committed in London and the South East.

However, London only accounted for one third of the number of frauds committed (37 out of 123), indicating that fraud was widespread across the country but has a tendency - with some significant exceptions - to be of lower value in the regions.

Overall, KPMG reported that value of frauds prosecuted had been boosted this year by some "super-cases", such as a ¿200m prosecution following the collapse of investment firm.

'True cost'
Jeremy Outen, partner at KPMG Forensic, said: "Unfortunately, fraud seems to be reaching new heights right now, although we can take some comfort from the fact that more cases are being successfully brought to court.

"However, the figures mask the true cost of fraud, which is borne by us all."

He added: "Fraudsters are characterised by greed, determination and ingenuity. It is not easy to stop them - which is why companies need to keep on reviewing and refining their systems of controls, and as individuals we all need to take care in making sure that we know who we are dealing with when asked for personal information and data."

Further in-depth analysis from the 'fraud barometer', which has been running for 19 years now, can be downloaded from the KPMG website - see link/above/right.