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East Midlands Chamber News

Chamber Patron Warns Midlands is Fraud Hotspot

Chamber Patron KPMG has released its latest Fraud Barometer, which found that the national cost of fraud in the first six months of 2015 rose by 22%.

The barometer, which measures fraud cases with losses of £100,000 or more which reach the UK courts, found that the national cost rose to £385m, from £317m in the same period last year.

With 160 cases, fraud volumes remained virtually identical to the first half of 2014, meaning that the average cost per fraud has increased from £2m to £2.4m, a 21% increase.

The value of fraud cases seen in the Midlands increased by 55% in the first half of 2015 compared to the same period last year. With case value in the first half of 2014 amounting to just under £21m, there has been a significant jump to this year’s figure of £32m. Cases of fraud in the region have increased from 16 cases to 19, with average case value in the Midlands up from £1.3m to £1.7m.

Simon Albrighton, Forensic Partner at KPMG in the Midlands, said: “The significant rise in the value of fraud cases in the region is partly due to several individual cases, including one of a high value investment fraud and another of mis-selling. What’s interesting is that these cases aren’t confined to one kind of perpetrator, they include management, employees and professional criminals, proving that substantial fraud isn’t just the domain of the career fraudster.

"However, what’s potentially more worrying to the man on the street is the increase in cases of fraud against individuals. While we saw just one example of this in the first half of 2014, amounting to £100,000, we have seen six cases this year, totalling £2.4m. Only a third of these crimes were committed by professional criminals, which proves the need to be vigilant whenever it comes to your finances, no matter how trustworthy someone might seem to be.”

Cases to reach the region’s crown courts during this period include:

  • A Solihull man was jailed for his part in an £8m rogue trading scheme which saw elderly and vulnerable people defrauded in a fake roofing service
  • A former magistrate from Loughborough took part in a £250,000 tax fraud and money laundering operation, which included taking 45% on his employees' earnings
  • A Northampton man defrauded his mother of £600,000 while she was seriously ill in a care home, spending the money on a new house and expensive food and wine
  • An eight-person gang were found guilty in Nottingham of a half million pound fraud, which involved taking money from pensioners to "protect them against future care home fees"

The National Picture:

Where there’s a will there’s a way

Nationally, the most common perpetrator of fraud within the family was the baby boomer who, perhaps frustrated by the increasingly common wait to receive their inheritance, seemingly took matters into their own hands. By value, 72% of familial fraud was committed by fraudsters aged over 45.

Hitesh Patel, UK Forensic Partner at KPMG, said: “Fraudsters in the family are abusing their intimate knowledge and close connections to steal from partners and parents. People are living longer, and we are seeing examples of people who are choosing to remove uncertainties about when or if they will get their inheritance by fraudulent means. It’s also likely these cases are just the tip of the iceberg – frauds of this nature often go unreported as embarrassed victims seek to ‘keep it in the family’ and ‘forgive and forget’.”

In one such case a woman stole her father’s savings after being granted power of attorney, leaving his care home bills unpaid. In another, a man stole his mother’s £600,000 savings after realising he was not the main recipient in her will.

KPMG notes that Power of Attorney registrations have more than doubled in the last four years, with almost 350,000 registered in the financial year ending April 2015, up from 150,000 in 2011.**

The march of the middle men

KPMG’s Fraud Barometer revealed a substantial rise in supply chain fraud, as criminals pass themselves or their products and services off as genuine. Customers were often unaware that they had been tricked by an imposter or that they had bought counterfeit goods. This type of fraud accounted for £99m in the first two quarters of 2015, an increase of £70m on the same period last year.

In one case the defendants are alleged to have set up fake government websites to dupe people into handing over money for administrative services for which the end consumer did not in fact have to pay. The losses are thought to total £30m.

Hitesh Patel commented: “Criminals are inserting themselves into the supply chain, and unwitting buyers often genuinely do not realise they are dealing with an intermediary when they do not need to, as a result of misrepresentation.

"This issue has been aggravated by the sheer volume of transactions conducted online. Criminals are inherently adaptable and have seamlessly moved with the times, adapting the way in which they target victims to take advantage of advances in technology and anonymity afforded by digital commerce."