Fraud to tune of £7.7m hits North East

Large scale fraud in the North East totalled £7.7m in the first half of the year, research from KMPG reveals.

Regional Crown Courts dealt with 10, £100,000+ frauds in the first half of 2013.

Despite a 40% drop in fraud last year, one £11m case inflated the figure to nearly £13.5m.

Cases included a family-led crime gang that staged car accidents for insurance money and a tattooist committed tax fraud totalling £260,000 over 11 years.

Sara Smith, of KPMG’s Newcastle Forensic practice, says: “While the back end of last year saw a resurgence of traditional con-artistry, this year has seen fraud cases turn a darker corner with professional criminals acting across borders, defrauding largely governments and financial institutions.

“The increase in the corruption of supply chains by fraudsters has been marked. In one particularly shocking case, a company sold fake bomb detectors to Iraqi authorities, at a financial cost of £55m, but the real damage was human injury and suffering. The risk to safety and therefore life through supply chain fraud can have serious operational and reputational consequences which often get overlooked as a result of financial impact being a primary focus.

“While procurement functions seek to do relevant due diligence checks on potential suppliers, fraudsters are increasingly getting smarter at circumventing traditional procurement processes and controls.

“Organisations need to make the most of the numerous data sources available and overlay that with the information they have on a third party they plan to do business with. Joining up the data is a key tool in building a more informed picture to prevent risks crystallising to such an extent that it causes damage to consumers and organisations.”

Nationally, fraud cases totalled £516m, up a third on last year as the average case value jumped from £2.8m to £3.5m.

Fraud committed against investors also saw a huge increase in 2013, with frauds totalling £74m coming to court.

Sara went on to say: “Honest investors are being defrauded as people are feeling compelled to seek alternative ways to maintain lifestyles with pensions, traditional investments and incomes squeezed at the same time as inflationary pressures driving up costs.

“Unfortunately the public is vulnerable to ponzi schemes dressed up as legitimate investment opportunities in the form of oil trading, wine clubs and property investments, which really are too good to be true. We note that the Financial Conduct Authority is moving to regulate alternative asset classes which may mitigate the problem but the public should still be alive to the threat of investment scams.”

KPMG say fraud has cost government and financial institutions £405m in 2013, a jump from £271m in the same period in 2012.

One of the main drivers for the losses to financial institutions was loan and mortgage fraud, up from £59m in 2012 to £162m this year.

Looking to promote your product/service to SME businesses in your region? Find out how Bdaily can help →