Credit crunch could lead to fraud bonanza

As times get tougher, high value corporate frauds could be on the increase, KPMG warns

High value corporate frauds could be on the increase in 2008 according to market watcher KPMG Forensic.

The firm has analysed 20 years’ worth of its Fraud Barometer statistics, which has pointed to increased activity in illegal activities, particularly if the credit crunch continues to bite.

Alex Plavsic, head of fraud investigations at KPMG, said: "Our analysis shows that in times of economic slowdown, when belts are tightened and processes are committed to greater scrutiny, more high value frauds have tended to be uncovered. If the current credit crunch does lead to a slowdown through 2008, we may therefore see the detection of some high value frauds in its wake."

KPMG also revealed that the fraud threat has been steadily extending beyond London, with fraud rising around the country. In the four years between 2003 and 2006, over 800 frauds of £100,000 or more came to court – more than in the previous 12 years put together. But whereas 20 years ago, the majority of frauds took place in London and the South East, over the last few years around two thirds have taken place in other parts of the country.

"London and the South East is still the home of most of the largest frauds by value, but there has been a notable increase in fraudsters' activity everywhere around the country,” added Plavsic. "The fraud threat has steadily rippled out around the UK. Overall, the trend has been relentlessly upwards over the last four years in particular."

According to KPMG the increase in the numbers of UK frauds has coincided with the rise of the professional fraud gangs. The government has become the predominant fraud target, particularly from 2003 onwards with the rise of VAT carousel fraud. Over £1bn of fraud cases worth £100,000 or more against the government have come to court since 2003.

Plavsic added: "The truth is that one reason fraud levels have been increasing recently is that technology has enabled more frauds to be committed. Where there is opportunity, there is fraud."