Fraudsters cashing in on respected reputations, with small businesses suffering

Fraudsters cash in, with small businesses suffering

Businesses hit by £95m fraud in the first half of 2016. Fraud against the health sector up 88% in first half of 2016. Charities and not for profit groups targeted by fraudsters.

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There was an overall fall in the volume and value of fraud going to courts in the UK to £328m in the first six months of the year. However, some sectors of society – including the health sector and charities – witnessed large increases in the value of fraudulent attacks against them. Much of the activity was conducted by middle class professionals turning to fraud by cashing in on their reputation, or by fraudsters claiming connections to those with renowned reputations.  

KPMG’s Fraud Barometer, which measures fraud cases with losses of £100,000 or more reaching the UK courts, shows that the value of prosecuted fraud fell in the first half of 2016, from £385m in 2015.  This drop was caused in large part by a reduction in smaller value cases, which also caused the average value of fraud per case to increase to £2.9m in 2016 compared to £2.4m in 2015. The drop in fraud recorded by the KPMG Fraud Barometer is considered to be a temporary aberration. UK law enforcement are immersed in a series of complex and large fraud investigations of over £100m in value.  However, we also note the increasing number of overseas and cross-border schemes targeting the UK, which often target large numbers of UK-based businesses and individuals; these are difficult to bring to Court in the UK. 

The vote for Brexit has caused an environment of uncertainty and economic volatility thus providing the perfect ecosystem within which fraudsters will conceal, mislead and misrepresent as they exploit people’s vulnerabilities and confusion about the future.  The landscape may be changing, but the fundamentals of managing risk and preventing fraud remain the same – keep calm and stay vigilant.  


Fraudsters push the boat out at companies’ expense

Commercial businesses were victims of fraud to the tune of £95m in the first half of the year with SME businesses particularly vulnerable.  Most often they were at the mercy of internal threats from trusted staff exploiting positions of authority, but the two biggest cases arose from external threats.

In one case, a charlatan posed as a billionaire banker to the Pope to help a gang swindle a shipping firm out of £73m.  The firm had been looking to increase its capital to fund the construction of a new ship.  The 49 year old duped them into handing over the funds by claiming he could get them a 1,200% return using a secretive Papal trading platform, but instead spent their millions living the high life.  

In the other case, an advertising scam saw thousands of small businesses across the country tricked into paying for adverts in a magazine that never materialised.  It was estimated that up to 15,000 victims fell prey to the sales team, who falsely claimed to be representing the police, fire or ambulance services to create trust and respectability.  With threats of legal action if invoices were not paid, some desperate businesses sold assets or defaulted on loans to pay off the scammers.

Commenting on the results Hitesh N Patel, UK Forensic Partner at KPMG, said  “While economic conditions remain soft, it is unsurprising that commercial enterprises and investors are looking for new ways of making money, often dealing with people they have not encountered before. For commercial businesses, two of the biggest frauds recorded this year progressed so far because the fraudsters were able to create a reputational illusion, convincing victim companies to hand over large amounts of money – often sums that materially impacted their ability to operate. As the environment for business continues to be tight and competitive, fraudsters are able to hide easily among genuine businesses.”


Fraudsters plaguing the healthcare sector

Fraudsters plaguing the healthcare sectorThe KPMG Fraud Barometer data also showed fraud against the health sector increasing over 88% in the first half of this year to £7.2m. Most of these frauds were committed by professionals within the industry. In one case a dentist charged private patients for work and then made over 6,600 fraudulent claims to the NHS for the same work. In other cases, a drug company boss submitted bogus factoring invoices totalling £3.1m to a bank in a bid to save his crumbling business, a firm of solicitors allegedly committed nearly £1m in medical invoice fraud, and two practice managers stole from their respective GP surgeries leaving the practices in financial distress.  

Hitesh N Patel commented:

These frauds in the healthcare sector have been committed by a range of professionals, from frontline medicine to those in the supply chain, who abuse their status and authority to bolster their income out of greed, or to maintain a lifestyle in the face of business problems.  Such circumvention of financial controls mirrors the experiences that we often see in commercial businesses. Trusted employees and professionals find that they have built up the authority and know-how to steal funds, and in submitting to the temptation destroy the trust and livelihoods of others.

The cases of fraud that we are seeing recorded in the healthcare sector are likely to be just the tip of the iceberg as a recent NHS report found that in England alone up to £5.7bn a year is potentially being lost to fraud from its £100bn budget.  This does not just have consequences for the healthcare sector but for us as patients as frontline services are impacted.


Fraudsters test the faith of charity donors 

The Fraud Barometer also recorded almost £6m worth of fraud in the first half of the year in which fraudsters hijacked charitable donations, pocketing the donations or the gift aid for themselves.  In one scam, a software programmer exploited the death of a charity founder who set up a programme helping women and children in crisis around the world. He faked donations and submitted tens of thousands of Gift Aid repayment claims to HM Revenue and Customs.  He was jailed for 12 years having pocketed more than £5m in gift aid from the scheme.

Hitesh N Patel, UK Forensic Partner at KPMG, said

Scams targeting income streams of charitable foundations deprive these organisations, and those who depend on them, of desperately needed and hard won funds. Charities are built on human good will and trust, and are focused on help not profit; sadly, this can make them a target for fraudsters. Private and corporate donors can play their part in stamping out these frauds in remaining alert and taking simple steps such as checking the track record of a charity.  These are certainly far from victimless crimes and can have huge consequence as it reduces the services available to help support those who need it most.”




Notes to editors:

For more information, please contact:

Zoe Sheppard, Senior PR Manager, KPMG
T: 07770 737 994  

Emma Murray, PR Manager, KPMG
T: 020 76946506


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About KPMG
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff.  The UK firm recorded a revenue of £1.96 billion in the year ended September 2015. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 174,000 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.  Each KPMG firm is a legally distinct and separate entity and describes itself as such. 


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