Value of fraud against Yorkshire’s financial institutions more than trebles in 2016

  • Commercial businesses remain the most common target for fraudsters in the region, although the value of such activity drops by 21%
  • Nationally, 2016 sees the resurgence of the “super case”
  • £113 million cyber fraud committed across the country – the largest in UK Courts since 2008

 

 New analysis by professional services firm KPMG has revealed the value of fraud against financial institutions in Yorkshire has more than trebled in 2016, from £619,000 in 2015 to £2.1m in 2016.

The firm’s Fraud Barometer, which measures fraud cases with losses of £100,000 or more reaching the UK courts, also found investors to be the target of high-value fraudulent activity. These cases accounted for £11.7m (61%) of the combined value of all fraud in the region.

In total, there were 25 fraud cases, worth £19.1m, brought to courts in the Yorkshire region during the year. While the value of fraud against commercial businesses decreased by 21%, these organisations remained the most common victims of fraud, accounting for 40% of total cases in the region. Professional criminals also remained the most common perpetrators, again accounting for 40% of all cases.

Vivien Hopkins, Forensic Director at KPMG in Leeds, Yorkshire, said:

Our region is known for its financial services sector, and its worrying to see the value of cases against our banks, building societies and investment community increase so dramatically.

 “Our research also highlights the high number of unscrupulous individuals out there who are purposely targeting businesses for their own financial gain. All of this combined continues to highlight the importance of fraud prevention, and should prompt management teams to remain vigilant and keep alert to the risk of fraud.”

 Notable cases coming to court in Yorkshire in 2016, include:

 Leeds

A collections manager stole more than £100,000 from a company where he was employed to chase bad debts.

The fraudster carried out the deception for almost three years before his offending came to light while working in a Leeds-based financial services company. An investigation was carried out which revealed 21 bogus transactions had been carried out from August 2012, with a total of £104,488 paid to his personal bank account.

Huddersfield

A man was jailed for his part in a sophisticated banking scam, in which staff in India were targeted to provide individual personal banking details to fraudsters with the potential to steal hundreds of thousands of pounds.

The potential risk of loss on accounts had applications not been declined or blocked was estimated to be £797,411.

Leeds

A fake billionaire from Leeds and his gang were jailed for stealing £5million from investors in a Panama land sting. The fraudsters left victims with no pensions or savings after conning them.

A judge deemed the fraudsters to have ‘left a trail of personal and financial ruin’ while they spent money on exotic holidays and expensive sports cars.

The main perpetrator was jailed for 12 years after admitting five fraud offences. Three others including his son were also jailed.

The National Story

 Value of UK fraud breaks £1 billion barrier for the first time in 5 years

 Nationally, the value of alleged fraud reaching UK Courts broke the £1bn barrier in 2016, due to a resurgence in “super cases”, according to latest research by KPMG Forensic.  This is the first time since 2011 that fraud has exceeded £1bn.

KPMG’s Fraud Barometer found that whilst the volume of alleged fraud for the year has dropped by nearly a third from 310 to 220, the value was up over 55% on last year’s £732m – this year saw £1,137m of alleged fraud hitting UK courts.  Consequently, the average value of fraud has more than doubled to £5.2m from £2.4m. Fraud against businesses was up seven-fold this year with internal fraud committed by employees and management the most common type of fraud to hit businesses.

Super cases – a mirror to the economy?

 The figures include over £900m derived from just seven “super cases”, cases where the value of alleged fraud is £50m or more. The surge in super cases, from £250m last year, may be a reflection of fraud becoming a more lucrative and practical proposition for those with the right skills and technology, or those in senior commercial roles.  Increased pressures both to deliver on targets in a highly competitive and uncertain environment and to preserve personal finances have made people more willing to disregard their moral compass and see fraud as a shortcut to success.  Combined with this are new opportunities for fraud that have largely been created by new technology.

The latest findings also show a picture reminiscent of recent economic fortunes – as the economy has slowly recovered from the financial crises, businesses and individuals have shown an increased appetite to spend or invest more and that money is now falling into fraudsters’ sights. At the other end of the spectrum, as austerity continues to pinch many, some employees and consumers are adopting less than legitimate means to maintain lifestyles.

Commenting on the results Hitesh N Patel, UK Forensic Partner at KPMG, said:

“The figures for 2016 tell us two things. Firstly, that we can expect more of these super frauds as challenging economic circumstances place pressures on businesses and individuals and as technology becomes more sophisticated.  Secondly, that this is going to put even more strain on law enforcement agencies who don’t have the resources to investigate every report of fraud that they receive: getting the large, often cross-border and complex frauds to court is extremely time consuming and resource intensive.  This places much more emphasis on businesses and consumers to protect themselves from fraudsters who will take advantage given the opportunity.”

Technology savvy wolves in electronic sheep’s clothing

The Fraud Barometer also recorded a rise in cyber-enabled fraud, up 1266% on 2015 figures.  The cases include a £113m cyber fraud, the largest recorded in UK Courts since 2008, as professional criminals cold-called bank customers and stole their money to fund their luxury lifestyle. Sophisticated techniques meant that when victims were contacted by the gang (claiming to be members of the bank’s fraud department and persuading them to reveal security details), they saw false telephone numbers appear under the caller ID, and were unable to make or receive calls whilst their accounts were being drained.  The fraudsters made between £1 million and £2 million a week at the scam’s peak and operated like a nine-to-five business using information from corrupt bank insiders.

Hitesh Patel commented:

“Both public and private organisations openly acknowledge that cyber-attacks are one of the most prevalent and high-impact risks they face, and yet many operate on the basis “it won’t happen to me”. Organisations must keep abreast of the cyber threats, both physical and digital, to ensure the protection mechanisms don’t become obsolete given the pace of technology and business change. You can have variety of IT protections in place to defend yourself, but it’s all for nothing if you are tricked into giving away the keys to the electronic vault.”

 Cheap deals with a hidden high price

 The Fraud Barometer recorded an emerging trend of consumers carrying out tech-enabled theft driven by a hunger to maintain a comfortable lifestyle on a low key budget.  Several cases this year involve consumers searching out goods and services on the internet that may have raised the eyebrows of the more conscientious consumer.  The bootleg bargains show customers unaware of or uncaring about the risk of conspiring with the online fraudsters in order to get their hands on goods for a fraction of the high street price.

In one case a 51 year old Leicester man was jailed for six years for masterminding a £60m fraud to supply free cable TV using illicit set-top boxes.  Working with five accomplices, he imported boxes from Asia and bypassed the encryption in order to allow people to watch a cable TV service without a legitimate subscription.  He promoted the business on internet forums and via his own website, as well as making bulk sales of the boxes all around the UK.  In another case a father and son were jailed for a £3m scam selling cheap teeth whitening kits that were dangerous and left some users with bleeding gums from chemical burns.  Advertising banners claimed the product was “ideal for any age group” and was “used by leading dentists throughout the UK and Europe” however they contained up to 110 times the allowable level of hydrogen peroxide.

Hitesh Patel commented:

“Through the rapid rise of technology and online platforms, more people than ever are being targeted by fraudsters who have unrestricted access to a larger pool of victims.  However, we are also seeing the internet being used by consumers who are being tempted to obtain goods and services that they have, or perhaps should have, a fair idea are not legitimate.  Consumers may often turn a blind eye, or consider this a victimless crime, but these cases show individual victims who ended up paying a high price with their wellbeing.  In addition, this shadow economy activity, which directly promotes money laundering and tax evasion, often help funds other more serious organised criminal enterprises, including human trafficking, drug smuggling and terrorism.”

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