Renewed efforts fail to stem tide of fraud
Number of cases still on the rise despite fall in value involved
In spite of stringent and determined efforts by government bodies and banks to stamp out fraud, the number of cases in the UK has increased over the past year, according to a report released today.
Consultancy firm KPMG revealed in its Forensic Fraud Barometer report that there were 69 major fraud cases brought before the courts in the first half of 2004, compared with 63 in the last six months (2H) of 2003.
VAT carousel or missing trader fraud, which is prevalent in the IT industry, is a major cause of this increase, according to the report.
Just last week four people were sentenced to a total of nine years and two months in jail following a £9m VAT missing trader fraud.
The prosecution followed a lengthy Customs and Excise investigation after which the accused were charged with moving large quantities of high-value chips and processors between the UK and Eire and avoiding VAT.
However, despite the rise, David Alexander, fraud investigation partner at KPMG Forensic, said the value of fraud cases reaching court fell to £71m in the first six months of 2004, compared with £158m in 2H 2003.
"The main reason for the fall in value over the past two years is the work Customs has been doing on cracking down on carousel fraud. The number of cases may be increasing, but the value is dropping," he said.
The government was the hardest hit, losing £33.2m to fraudsters, with the commercial sector losing £8.8m in total.
Alexander believes fraud will continue to increase. "New chip and PIN schemes introduced by banks will work in certain cases, but the fraudsters will find ways around it," he said.
Nitin Joshi, partner at insolvency specialist PKF, agreed.
"Stock markets are in the doldrums so there is no money to be made legitimately, interest rates are fluctuating and the systems used by companies to identify fraud are dire, so there are plenty of loopholes and incentives to be found by fraudsters," he said.