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Public purse hit by record fraud levels

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10th Jan 2011
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Financial crime hit record levels in 2010 with the government overtaking the financial services industry as the main victim.

The public purse bore the brunt of the attack with more than 42% of all cases targeting the government, in total worth £593m. In 2010 the number of cases increased from 59 to 70, a rise of nearly 20%, according to the KPMG fraud barometer.

Hitesh Patel, KPMG forensic partner, said: “Government agencies, like commercial businesses, have been increasingly vulnerable to the threat of fraud. In a year of austerity measures implemented by government, tax increases, the threat of rising unemployment, and significant structural change it is hardly surprising that the long fingers of the fraudster have reached into the public purse.”

“Fraud is not a victimless crime, particularly at a time when the country deficit is so high. Anti-fraud measures need to be reviewed and amplified by the public sector to combat this assault” he added.

The fastest growing area was fraud committed by company managers - up 30% in value to £441m against the previous year. The sharp rise is thought to be linked to the pressure directors have been under throughout the recession.

The total number of fraud cases reported in the UK last year rose 16% to 315 - worth around £1.4bn – representing the highest level ever recorded in the 23-year history of KPMG’s research.

Tax fraud, money laundering and complex cases involving new technology all increased in the year.

In particular KPMG says that fraudsters are increasingly targeting new technology, highlighting one case in the Midlands where a DJ was accused of plotting a credit card scam on iTunes.

Both the man and his 10 accomplices targeted the Apple and Amazon sites with 20 songs which they then sold through the respective websites. It is thought that they then stole 1,500 credit cards to buy the songs, and then claimed back just under £469,000 in royalties.
 
Hitesh commented: “The online universe has opened up a whole new world for innovative fraudsters. While credit card and data theft remain common tools from which they are able to profit, the need for ever more effective techniques to combat fraud grow greater by the day. Unfortunately anti-fraud measures do not always keep pace with professional criminal activity.”

Since 2009 there has been a worrying increase in false repayment claims, some of which involve masquerading legitimate agent details and filing bogus returns. Another twist in 2009 involved a Ukrainian crime gang who stole £4.5m through tax fraud.

The gang attempted to claim more than £8m in tax repayments but significant numbers of tax returns were identified by HMRC as fraudulent and the repayments were stopped. In order to carry out the crimes the West London-based gang created thousands of false identities using false passports and other faked documents. They opened over 750 bank accounts to receive the tax repayments and then launder the proceeds.

The gang submitted at least 1,600 online Self Assessment tax returns for fictitious foreign migrant workers, falsely claiming that they had worked in the UK and overpaid income tax.

The KPMG fraud barometer is an important and useful measure of fraud in the UK, not least because it has operated for over 20 years and shows trends - even fashions - in fraud over that time.

David Winch of Accounting Evidence, added: "By its nature however it is 'behind the times' in that it reflects cases coming to Crown Court. These frauds were perpetrated some time before - even years before - they are reflected in the barometer.

"And inevitably the barometer reflects the frauds which are being discovered and prosecuted - which may tell us as much about the priorities of the police, Serious Fraud Office, HMRC and other investigators and prosecutors, as it does about the current activities of fraudsters."

Another key point is that the frauds referred to by KPMG each involved sums of £100,000 or more, and of the total number of frauds prosecuted these are a small minority.

The government is now making £900m available over the spending review period to raise additional revenues from those who undermine the tax system, bringing in around £7bn per annum, by 2014-15, in additional tax revenues.

The debate continues in the 'Money laundering and crime' private discussion group.

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By cymraeg_draig
10th Jan 2011 15:48

Perhaps they should start by more prosecutions of expense fiddli

.

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