The latest results from the KPMG Fraud Barometer have just been published and provides an analysis of UK fraud cases in 2022. The bi-annual Barometer is based on media-reported frauds and is useful because it helps to highlight both the risk facing businesses and the actions, they should be taking to protect themselves. It is the longest-running survey of its kind in the UK, reporting on major fraud major fraud cases being heard in the UK’s Crown Courts where charges are in excess of £100,000. We’ll speak to a specialist in fraud investigations to understand how HR can help.
The key highlights of the latest survey:
- The total value of alleged fraud over £100k reaching UK Courts in 2022 was £1.12bn, an increase of 151% compared to £444.7m in 2021
- Embezzlement has remained the most common fraud type for 2022
- Of the 219 cases heard in 2022, 80% of cases involved male perpetrators and 32% were aged 36-45 years old.
- Management was the second largest group of perpetrators by volume, accounting for just over a quarter of cases in 2022.
Commenting on the findings, Roy Waligora, Partner and Head of UK Investigations at KPMG, said: “Embezzlement can be a big problem for businesses as employees and management look to exploit their positions. It is very important for businesses to have channels to report fraud and when businesses become suspicious about any fraudulent activity, that they act swiftly to uncover the facts so they can take decisive action against the individual or individuals. This is especially relevant as companies start to address the requirements of a Fraud Statement in their annual reports.”
We agree with that and it’s a message we have been putting out to our own clients so let’s hear more about that. Andrew Herring is one of the lawyers in our litigation team, specialising in complex litigation and fraud-related investigations and he joined me by phone from the Birmingham office to discuss it. I started by asking Andrew about the warning signs, the red flags that HR should be alive to?
Andrew Herring: “The first one from our perspective is people that are working excessive hours, or who don't take the right levels of annual leave that you might expect. There have been some very high-profile cases over the years, where people have been committing fraud and they don't leave work because they need to be in control of the situation in order to ensure that they're not found out, and that things carry on in the way that they would like them to, and they don't get caught. So, it's always worth just making sure you know if people are working excessive hours, or working odd times of the day, and from a pastoral perspective, you're checking that everything's okay with them but then, also, that it's not a red flag of other things going on. For example, on the holiday point, in some regulated sectors businesses will ensure that people take a mandatory two-week holiday during the course of the year just so that if audits do need to be undertaken about what work has been undertaken, those can be carried out safely. Then there will be other things that that might be warning signs, for example, people using unnecessarily complicated working practices. If something can be done simply and openly and transparently it's very likely to be a quite a rigorous process whereas if people are making it overly complicated, then that just creates potential situations that can be exploited, and we see that quite often in the finance teams within businesses. You know, the invoicing procedures, the authorization procedures, if it's too complicated it gives people the opportunity to commit fraud. I think also, and this is difficult one because there is this huge emphasis on data protection and protecting confidential, commercially sensitive information within organisations but, again, if people are taking steps to keep what they're doing secret in a way, which is not appropriate within the business, that might be a marker that they're doing something wrong that they're trying to hide from their fellow employees or management so that's something to keep an eye on. Obviously, people living beyond their means is usually a big marker. I have dealt with multimillion pound frauds where the thing which has caught the suspicion of the board has been the flash car in the car parked outside the office when everyone else is driving very modest vehicles. So, anything that suggests that - the holidays or anything out of the ordinary like driving flash cars, overly expensive jewellery, that sort of thing. There might be absolutely perfectly justifiable reasons for that, but if it doesn't add up then it's worth just then thinking well, do we need to take a closer look at this individual? Then in terms of when you're thinking about well, is someone, you know, maybe doing wrong doing, we all have very stressful jobs but, actually, a change in someone's personality can sometimes be a marker for people that are doing something wrong because, quite often, the stress of trying to have multiple lives at the same time can actually cause people to behave differently in the workplace and again, from a pastoral perspective, that's something that needs to be looked at and to check that people are okay, from mental wellbeing perspective, etcetera, but it might be the red flag. Then the classic in that area where we have dealt with cases in the past is where employees have a gambling habit and, actually, they start turning to defrauding their employer in order to generate the money they need to maintain their losses on a gambling account and, unfortunately, that is something we've come across a number of times and people's personalities and their behaviours have changed because they're trying to juggle their financial affairs outside of work.”
KPMG’s latest Fraud Barometer Report was published in February, and we have put a link to it in the transcript of this programme.
LINKS
- Link to KPMG’s Fraud Barometer Report (published February 2023)
