Rising fraud spirits away millions from UK businesses

The total number of fraud cases in the UK rose by 14% in 2004, according to latest figures from KPMG’s 'Fraud Barometer', but the overall value of frauds being committed fell by 12%.

KPMG attributed the drop in the value of fraud cases overall to a clamp down by Customs and Excise on large tax frauds, though, the rise in actual cases signals a growing problem for UK companies.

In all, 174 fraud cases came to court last year, with a total value just under £330 million. Despite a small drop in the cost of fraud from 2003 – which ran at £374.5 million – over the past five years, there has been an almost threefold increase in fraud cases being tried in UK courts.

Management and employees accounted for a third of all cases, defrauding their companies of around £106 million. The research reveals a growing problem of workers processing payments to bogus companies or adding fake workers on to the payroll. Last year, UK businesses paid several million pounds to phantom workers and almost £70 million in bogus invoices. Simply stealing or forging company cheques also remained a popular way to remove money from a business.

The Fraud Barometer’s findings follow a YouGov survey commissioned by KPMG at the end of 2004 which showed that of those who had witnessed wrong-doing at work (44% overall), 23% cited colleagues processing fake transactions.

Organised crime continue to dominate the large-scale fraud cases with professional criminals, involved in VAT scams, counterfeiting and tax evasion, accounting for 54% of all frauds (by value), up 13% on 2003, costing in excess of £180 million.

The Government is still the biggest target of fraud. In 2004, fraud was estimated to have cost £174 million in lost revenue alone.

David Alexander, Fraud Investigation Partner at KPMG said the figures were "bad news" for UK businesses: "Whilst our survey covers fraud cases over £100,000 we often find that losing even what may be relatively small amounts of money can disrupt cash flow and bring quite large businesses to their knees.”

He said that many of the frauds could have been avoided by "simple but robust internal controls" that could prevent fraudsters exploiting weaknesses.

The fraud barometer has been running for 15 years, and considers major fraud cases being heard in the UK’s Crown Courts, where charges are in excess of £100,000.

(SP)