While the number of cases in the first six months of the year is more than the total number of cases for the whole of 2002, the average value per case in the same period decreased from £9m to £3m.
The research considered major fraud cases being heard in the UK (charges over £100,000 in Crown Court). In the first six months of 2003 there were 90 such cases with a total value of £216 million, as compared to only 83 over the entire of 2002, but with a higher cost - £255 million.
David Alexander, Fraud Investigation Partner at KPMG Forensic linked the increase in cases to the slow economy. He said:
"In difficult economic times, the pressure on individuals to commit fraud is increased. This pressure can come from many sources ranging from trying to meet unrealistic profit targets to an inability to pay credit card bills or the mortgage. It is not surprising, therefore, that we are seeing a rise in 'smaller' frauds as more and more desperate people turn to fraud as the only way out."
'Carousel' fraud rises
The Fraud Barometer recorded five cases of VAT on phone fraud totalling £69 million. This type of fraud is called "carousel" fraud because it involves repeated cross border purchases, often of computer chips or mobile phones between connected companies, sometimes controlled by criminal syndicates.
In its simplest form, a fraudster imports goods from a zero-rate VAT source, sells the goods with VAT included and then disappears without passing the VAT onto Customs.
One example of carousel fraud included the case of two Staffordshire businessmen who were sentenced to over 16 years in jail for a £38 million fraud. They bought and sold mobile phones across Europe, and dodged the tax through businesses they set up in Spain, the Irish Republic and the UK.
HM Customs and Excise acknowledge that more needs to be done. A spokesperson for the agency said on Monday that targeted measures, announced in the Budget, should help. He added, "Over the last three years Customs have succeeded in stabilising the previous rapid growth in losses from carousel fraud. We now have over 400 officers dedicated to identifying and tackling this serious criminal activity."
Banking and electronic fraud on the increase
The number of financial/banking frauds increased almost three-fold during this six month period compared to the last six months of 2002 – up from five cases to fourteen – at an average of £1.1 million per case.
Many of these frauds were perpetrated by employees who used their inside knowledge of the business to steal from their employer. In one example, a former employee of Lloyds TSB was charged with stealing £1.2 million from the bank.
Identity fraud was shown to remain a threat within this sector. One example was the case of a man who plundered the electoral roll to "steal" 59 identities to forge thousands of documents to support his credit card and bank applications to obtain £556,000 of funds.
Electronic payment fraud has also become a serious issue for financial institutions. Several frauds involving stolen cash point cards and PIN numbers were noted, including one group of twelve people who were jailed after they exploited a computer glitch, which allowed them to withdraw a total of £285,000 from their accounts without the amount actually being debited.
David Alexander had this advice for companies:
"The message for companies across the country as a whole is act now or you will be the next victim. Businesses need to ask some basic questions about their approach to fraud. What is the quality of your organisation's anti-fraud strategy? How effective is your fraud awareness programme? How developed is the understanding of fraud risks facing your organisation?
"These are exactly the sorts of questions that companies are now being asked by their auditors, non-executives and regulatory bodies, and they will require answers. Businesses that fail to take fraud risk seriously, do so at their peril."