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This is the highest value since 1995 and the second highest in the 20 year history of the Barometer.

The number of cases coming to court fell to 197 from 277 in 2006, but this remains a higher number than seen in any year prior to 2005.

With fears that the credit crunch will lead to a period of protracted economic slowdown, there is the potential that personal and corporate pressures may fuel fraudulent behaviour making the situation worse in 2008 rather than better, KPMG Forensic warns.
Hitesh Patel, partner at KPMG Forensic, said that levels of fraud continue to remain disturbingly high.

Tip of the iceberg 

Organised gangs have been more active than ever, with a proliferation in VAT frauds, ID thefts and other forms of white collar crime, to the tune of a huge £889m or nearly 90 per cent of fraud by value.

Patel calls the sophistication of organised fraud in the UK extremely concerning. More fraud cases have been coming to court in recent years than previously, but he fears that this is just the tip of the iceberg.

2007 saw a respite in prosecutions for frauds against banks and other corporates, but now that the economy looks set to slow, Patel warns we could see more people attempting frauds to ease their financial burdens.

“As companies tighten their belts in the harsher conditions and take a closer look at their operations and related expenditure, it is highly possible that a greater number of frauds may be detected,” Patel adds.

Organised criminals accounted for nearly 90 percent of fraud by value in 2007 (£889m), with the Government agencies having been the primary target (£833m). This represents an enormous jump from 2006, when professional gangs accounted for £221m of fraud.

Carousel fraud 

Once again last year, carousel fraud on items such as mobile phones represented a substantial proportion of the value of organised fraud.

It remains to be seen whether the reverse charging mechanism introduced by the Government last summer for domestic supplies of mobile phones and computer chips, combined with the continued success of their operational efforts, will have a material impact on the scale of carousel fraud cases, or whether gangs will simply move their focus to other goods.

Gangs have also aggressively exploited ID theft to perpetrate scams, making false benefit or tax credit claims.

One husband and wife team claimed benefits for no fewer than eight adults and forty six children at a one bed flat in London, defrauding the public purse of over £1.1m.

Other gangs targeted the transport system, organising large scale frauds on fake bus and tube passes. Some criminal groups have become creative and brazen in the manner in which they steal and utilise ID’s.

One gang stole homeowners’ identities by posing as would-be buyers, collecting enough details on the house to apply for title deeds from the Land Registry and then remortgaging the properties.

A Midlands-based gang got away with some £500,000 in this way. Another Surrey-based man simply took down details of passing cars and then approached car brokers claiming to be an agent working on behalf of a non-existent customer, and set up financing agreements with the money going into an account he controlled.

Whereas the Government suffered heavily in 2007, financial institutions and other corporates enjoyed a fall in the value of frauds against them.

£37m of fraud against banks came to court in 2007, substantially down from over £140m in 2006, while commercial business suffered £24m of fraud compared to £81m a year earlier.

Nevertheless, particularly in the current economic climate, KPMG warns that corporates need to remain extremely vigilant to the fraud threat.

Employees and management carried out roughly the same number of frauds (36 and 34 respectively), again down from 2006 (54 and 48).

Once again though, management inflicted significantly more damage on their companies with their frauds totalling £54m, double the £27m that employees perpetrated.

Though levels overall were down, there was a notable number of accounting frauds – 21 of them representing £20m of fraud.

Champagne reception 

Some internal fraudsters were extremely well-trusted by their company, such as the company accountant whose Buckinghamshire firm paid for a champagne reception before he left on his honeymoon.

While he was away, they discovered a £700,000 hole in their finances which he had been siphoning away to fund a lavish lifestyle.