KPMG Forensic’s Fraud Barometer,
January 2010

Record fraud in 2009 closes out the ‘naughty Noughties’’

2009

2009 saw the highest number of cases of serious fraud by managers and employees (123) since the Fraud Barometer began. There was a major increase in fraud by company managers coming to court, with £335m of cases compared to £129m in 2008. Employees also racked up far higher losses, with cases worth £232m, more than double the £100m figure for 2008. The biggest perpetrators of fraud were organised criminals, however, with £719m of fraud, though this was down somewhat from 2008 when they accounted for over £800m.

The hardest hit sector was the Government and public sector organisations, who suffered frauds to the value of £476m - mainly in the form of tax and benefit fraud - more than double the £207m figure for 2008. Financial institutions remained a major target, with cases worth nearly £396m, slightly up from £388m the previous year.

Mortgage fraud doubles

Mortgage fraud continued its steady rise in 2009 with 31 cases worth £77m in the year, compared to 25 cases worth £36m in 2008 and just 10 cases worth just £3.7m in 2007. Some cases involved organised rings including mortgage brokers and chartered accountants, such as a scam centred on a block of 84 flats in Thamesmead, London that netted some £3.5m for the perpetrators. Others involved individual applicants, such as one North East man who was charged with 16 different offences relating to mortgage loan application fraud, totalling over £700,000. KPMG predicts that increasing amounts of mortgage fraud will come to light in the wake of the end of the property boom and as lenders increasingly scrutinise their mortgage books.

Accounting fraud

There were many cases of fraud within accounting and book-keeping departments – 33 cases worth a collective £44m came to court in 2009. Many of the fraudsters had worked for their victims for years and were well trusted by their employers. Several cases involved people with prior convictions, such as the accountant at a Birmingham-based property management company who took more than £350,000 from his employers by transferring money from clients into accounts in his own name. He in fact already had a history of committing theft and deception under a different name.

Vivien Osborne commented: “It is essential for companies to rigorously screen potential employees and carry out proper identity checks. Knowing who you employ and the extent of any risk they pose to the organisation is a key line of fraud defence.”

Methodology

KPMG’s Fraud Barometer has been running for 22 years, and considers major fraud cases being heard in the UK’s Crown Courts, where charges are in excess of £100,000.

Media enquiries to

Alison Anderson
PR manager, KPMG
T: 0113 254 2980/07733 453 065
E: alison.anderson@kpmg.co.uk

Results

Fraud by perpetrator (Jan-Dec 2009)

Perpetrator	Total (£)	Number of cases
Management	335,610,686	65
Customer	26,426,554	40
Professional Criminal	718,758,413	101
Employee	232,626,170	58
Other	1,004,312	7
Total	1,314,426,135	271

Fraud by victim (Jan-Dec 2009)

Victim	Total (£)	Number of cases
Government	476,210,298	59
Investor	339,281,908	27
Financial Institution	396,352,550	79
Commercial Business	58,425,163	59
Other	44,156,217	47
Total	1,314,426,135	271

Fraud by region (Jan-Dec 2009)

Region	Total (£)	Number of cases
London & South East	818,461,930	107
North West	61,922,635	38
Midlands	111,928,804	35
North East	119,647,671	42
Northern Ireland	8,251,860	4
South West and Wales	173,419,142	27
Scotland	20,794,093	18
Total	1,314,426,135	271

About KPMG Forensic: KPMG’s Forensic practice includes a European fraud investigation and dispute advisory team of over 400 people, including ex-police officers, forensic accountants, expert witnesses, data mining consultants and fraud risk management specialists. It investigates and advises on all suspicions of fraud and deception including, for example, procurement, treasury, payments and revenue fraud and accounts manipulation, as well as giving expert evidence in commercial disputes Our casebook ranges from matters of less than £50,000 to major international scams or disputes with sums at risk in excess of $1 billion. Our clients are truly international. Over the last few years we have worked all over the UK and Europe. Other countries in which we have carried out assignments include Brazil, Argentina, Congo, UAE, India, Libya, Iraq, Indonesia, and South Korea.

About KPMG: KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with nearly 11,000 partners and staff. The UK firm recorded a turnover of £1.6 billion in the year ended September 2009. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. We operate in 146 countries and have more than 140,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.

Enquiries

Vivien Osborne
Director,
KPMG Forensic

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