Details of KPMG’s Forensic Fraud Barometer, released on February 2, show that despite worrying increases in UK fraud, the government's intensified crackdown on ‘carousel fraud’ has paid dividends with losses decreasing markedly year-on-year.
More than GBP1.1bn of fraud came to UK courts in 2008 according to KPMG Forensic’s Fraud Barometer – the highest level recorded since 1995 and the second highest in the twenty-one year history of the survey. Fraud by professional gangs remained at the extremely high levels seen in previous years (GBP800m in 2008), but there was a marked increase in fraud by individuals. Taken together, company managers, employees and customers were tried for some GBP300m of fraud last year, three times the value seen in 2007.
KPMG warns that the worst is yet to come: the bulk of the fraud committed since the credit crunch began in August 2007 will most likely not yet have come into the public courts. The Fraud Barometer’s records show that in the last recession of the early nineties the full peak of fraud in the courts was not reached until 1995.
Hitesh Patel, fraud investigation partner at KPMG Forensic, said: “These figures are bad enough in themselves, but I fear the trend for the next couple of years will be even worse. As the global economic downturn takes hold and organisations look ever more closely at their operations it is very likely that more fraud will come to light so that the real impact of the credit crunch on fraud is yet to be fully felt. Already though, the signs are there - globally in the last twelve months alone at least three alleged multi-billion pound frauds have been uncovered.”Despite growth in the overall figures, KPMG found that, conversely, the government experienced a significant fall in its exposure to fraud, and this has been attributed to an intensified crackdown on ‘carousel fraud’ – where VAT on items such as mobile phones is fraudulently claimed back.
The Exchequer lost GBP207m in fraud (in 56 cases) in 2008, down from GBP833m in 2007, with ‘carousel fraud’ accounting for GBP115m of those losses in 2008, down from GBP700m in 2007.
"While not out of the woods yet, as further carousel fraud prosecutions may come to court, it is an encouraging sign that government efforts designed to counteract carousel fraud (the ‘reverse charge’ mechanism) may indeed be paying dividends," KPMG stated.
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