Fraud soars to £81m in the Midlands in first half of 2019

The value of alleged fraud cases across the Midlands has soared to more than £81.6 million, according to the latest KPMG Fraud Barometer.  The research, which measures cases valued over £100,000, has revealed Midlands courts dealt with 42 cases (26 in the West Midlands, 16 in the East Midlands) in the first six months of 2019, up from 38 in the first half of 2018.  While the number of fraud incidents has increased, the combined value has also risen by more than £43 million.

The biggest victims of high value fraud in the Midlands are businesses, with 11 cases accounting for almost £48 million, and the Government, with a total of 16 cases valued at more than £22.6 million.

In one case, business owner Carol Hudson was jailed for two years and disqualified from being a director, after she was found guilty of bribery. The former owner of ALCA Fasteners in Darlaston paid nearly £300,000 to an employee of the Wurth Group, over a period of five years, securing more than £12 million worth of lucrative contracts.

Julie Bruce, Forensic Director at KPMG in the Midlands, said: “With the number of alleged fraud cases coming to court in the Midlands increasing there is also a worrying rise in the value of cases, particularly those targeting and involving the business community.

“It’s clear that businesses across the region need to be more prepared than ever before for the risk both within and outside their organisations. Criminals are becoming increasingly more sophisticated in their approach, so companies of all sizes and across all sectors must ensure they develop a robust, preventative strategy to avoid becoming the victims of professional scammers.”

The National Story

Over £319m of alleged fraud hit UK Courts in the first half of 2019, down from £345m in the same period last year according to KPMG’s Fraud Barometer, released today. 217 cases of alleged fraud were heard in Courts across the country, a decrease of 13% on the same time last year, which saw 249 cases.

The Fraud Barometer, which records fraud cases coming to UK Courts with a value of £100,000 and above, noted a worrying commercialisation of cyber-crime and a number of repeat offenders making their way back to court amongst the cases recorded.

Commercialisation of cyber-crime

The Fraud Barometer recorded a number of cases in which the commercialisation of cyber-crime had been a factor – with criminals advertising their services on the dark web.  In one case, a cyber criminal who created a virus and launched an attack which knocked a communications company in Liberia offline, was jailed for 32 months.  He had been paid $30,000 by a rival company to cause the mass disruption – which the victim spent $600,000 repairing.

The data also recorded a 57% increase in the number of account takeover cases reaching court, in the first half of the year where digital scammers used a range of techniques including email, SMS and apps to get hold of personal data that then enabled them to take over bank and credit card accounts.

Roy Waligora, KPMG UK Head of Investigations observed: “We are noting a worrying move from criminals simply hacking as a means to an end to being industrialised personal data brokers on the dark web.  As our digital footprints get larger, cybercriminals will continue to develop new and innovative ways to steal personal data. If we are not alive to the threats, there is a great risk that we increase our vulnerability to criminals through our inaction.

“The Cyber-Attacks (Asset-Freezing) Regulations 2019 (SI 2019/956) entered into force in June, and require banks to repay funds to customers stolen as a result of account takeover.  Whilst this is a very positive step for the customer, we all need to remain vigilant as consumers will continue to bear such costs indirectly.”

Repeat offenders fail to learn their lesson

Another trend coming through in the Fraud Barometer data saw a number of repeat offenders heading back to Court.  The Fraud Barometer recorded four cases of people with previous convictions for fraud coming back to court under new charges totalling £2.6m. In some cases, the alleged repeat offenders were able to secure employment in new roles where they subsequently were able to circumvent internal controls to continue to commit fraud.

In one case a fraudster was caught trying to pay a £100,000 tax fraud debt with money he had stolen by staging another scam. The 57 year old fraudster first appeared in court in 2016 where he told the judge at Leicester Crown that he could repay the sum of £107,000 if given more time to come up with the money. Investigators from HM Revenue and Customs later discovered he was raising the money to pay the debt through a second scam that involved stealing more than £580,000 from other businesses.  He admitted the second fraud at court in 2019 where he was jailed for four years.

Roy Waligora said: “Whilst for most fraudsters, being caught and convicted once is enough to ensure they don’t continue to commit crime, for some the lure of the prize on offer is too much to resist – regardless of the consequences.  Businesses need to ensure they are doing thorough due diligence on the people they are hiring into their organisations – particularly if they are filling roles with financial responsibilities.”