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Fraud increasing steeply, says KPMG

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5th Aug 2015
Editor AccountingWEB
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Fraud has increased by 22% in the first half of the year to £385m, the KPMG fraud barometer has reported. The three areas where fraud had significantly increased: fraud committed within the family, criminal middle men, and people in managerial positions, or with responsibility.

Fraud committed by family members betraying the trust of elderly relatives has increased by 384%. The motivation seems to be from family members growing frustrated waiting for their inheritance. While KPMG is reporting that elderly relatives have had £1.7m stolen, this total could just be scratching the surface with a lot of cases going unreported. With the nation living longer, it is possible that as the years go by we could be seeing more fraudsters falling in this category becoming more widespread.  

The volume of transactions now being done online his caused an increase in counterfeit goods being sold by 242% This form of fraud, dubbed the middle man fraud by the report, has seen criminal misrepresenting themselves or their goods to the customer, resulting in £99m in the first two quarters of 2015.

Those in the position of responsibility – white collar workers – are the source of the biggest increase of fraud, seeing crime in this area increasing from £72m last year to £262m, accounting for 68% of fraud. These fraudsters are motivated by stealing money to supplement their lavish lifestyle.   

Incidentally, this week fraud specialists PKF Littlejohn published their own findings in Countering fraud for competitive advantage, indicating that UK businesses lose 5.6% of the total expenditures to fraud – £103bn. Jim Gee, co-author of the report and Head of Forensic and Counter Fraud Services at PKF Littlejohn, reports that it is not often the headline grabbing cases which are the main offender:

“Most fraud is high volume, low value and therefore difficult to detect and expensive to investigate. Companies which have successfully reduced the cost of fraud have focused on pre-empting it: creating stronger anti-fraud cultures, more effective deterrence and preventing fraud by designing weaknesses out of processes and systems. Our report shows that a real competitive advantage can be gained from taking this approach.

“This is important because fraud over recent years has increased.  There are many factors contributing to the increase, including the impact of the recession on people’s incomes and increased opportunities through the rise of the cyber world.  But other factors, such as reduced adherence to collective moral and ethical norms, and the increasing pace of business life unmatched by related development of controls, are also important.”

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By JimLittle
05th Aug 2015 15:51

Not surprised

A lot of companies are so busy generating sales they often leave the back door open.  I think there is fraud in most companies - companies do not take even contemplate chance of fraud until when it does happen all hell breaks lose and only then robust controls are installed 

While they need to trust their employees they should also anticipate areas where employees could breach their fiduciary duty.  If you leave the sweet shop unlocked it is inevitable someone will come along and empty it.  

Some of this is just common sense and basics like two signatories on bank accounts often one person has full access. Though another common area where unscrupulous employees will exploit is setting themselves in partnership with their friend and then passing business to that company who charge at exorbitant rates.  I am sure this discreet ploy goes on more often people would think

Small companies should really use an accountants knowledge in this area and ask for their opinion.

I have seen fraud and really does having a lasting impact ion many people.   There is always an scapegoat too

On the positive, I know what exactly to look for to gauge areas of weakness with the internal controls and can advise my clients accordingly

 

 

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By johncharles
06th Aug 2015 09:31

Sorry but in most cases you are wrong

Richard Hattersley. It isn't funding lavish lifestyles that is the problem because there are a lot of people out there that are struggling to keep a normal lifestyle together. Most of the clients I see are getting poor profits for very long hours. In 2004 I started a practice working 3,000 hours per year and only earning £2,000 profit after all expenses were deducted and that is all I got out of £55,000 turnover. I would have been very tempted myself but my mother in law financially helped out my wife and I and without that I would have succumbed to temptation. Would you call being on £2,000 a year being lavish. I don't smoke or drink and then I couldn't afford holidays, no flash car and a terrace house, in need of repair, and no luxury mansion or villa anywhere. Only a minute percentage of fraud is to fund lavish lifestyles.

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Richard Hattersley
By Richard Hattersley
06th Aug 2015 11:27

@Johncharles

Hi John, 

Sorry for the confusion. Funding their lavish lifestyles was directed at the people in position of responsibility, many in managerial positions. KPMG said that recent individuals committing this type of fraud includes an MEP and the head of operations at the Royal horticultural society.

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