Businesses persistently targeted with fraudsters falsifying finances to entice investment

Businesses persistently targeted

The cost of ignorance: Fraudsters falsify finances to entice investment, resulting in losses of £176m.

Partner, Forensic

KPMG in the UK

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Fraud

Businesses were also persistently targeted, with the private sector losing £332m in 2015 to scams. Criminals used tried and tested techniques, with some falsifying their finances to deceive victims and extract funds or entice funding investment. A failure to scrutinise prospective deals and third parties resulted in losses of £176m in 2015, a tenfold increase on 2014.

In one large case, fraudsters deployed this technique to target financial institutions, securing fraudulent loans totalling £142m. The perpetrators allegedly presented a falsified order book as an asset, against which the large loans could be secured. The customers did not in fact exist.

Hitesh Patel, Forensic Partner at KPMG in the UK, commented: “These worrying levels of losses to business have arisen simply as a result of not knowing the integrity and track record of who is on the other side of a deal. With detailed financial information available at the click of a button, it is easier than ever for criminals to falsify their finances. However, in many cases businesses can expose such fraudsters by deploying thorough checks and undertaking full due diligence. Businesses must raise their defences and put in place thorough checks around counterparties - the cost of ignorance is one that businesses can readily minimise.”

Due diligence is just one tool organisations can use to defend against fraud. A culture of zero tolerance to fraud, an effective whistle-blowing line to enable employees to be the eyes and ears of an organisation, coupled with data analytics to detect fraudulent activity can often provide strong deterrence to would-be fraudsters.

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