articles | 07 August 2015 | KPMG Limited

Fraud up, and it’s becoming a family affair

• UK fraud coming to Court soars to £385m in the first half of 2015, an increase of 22% • Explosion in family fraud as Britain’s elderly preyed on by younger relatives • Fraudulent middlemen line their pockets duping unwary buyers

KPMG’s Fraud Barometer, which measures fraud cases with losses of £100.000 or more reaching the UK courts, has found that the value of fraud rose by 22% in the first half of this year to £385m (£317m in the same period last year). With 160 cases, fraud volumes remained virtually identical to the first half of 2014, meaning that the average value of fraud has increased from £2m to £2,4m, a 21% increase.

The data shows a very marked increase in “middle man” fraud, up over 242% to £99m, as criminals insert themselves into the supply chain.  However, it is those in positions of responsibility and management who have driven the growth in fraud, accounting for over 68% of fraud by value in the first half of 2015, compared to only 22% in 2014.

The barometer also reveals an explosion of cases in which individuals, betraying the trust of those closest to them, targeted their own relatives.  Fraud on families by one of their own grew by 384% compared to the same period last year.  Elderly relatives were some of the main victims, and had £1,7m stolen from them by younger members of the family.

Where there’s a will there’s a way

The most common perpetrator of fraudwithin the family was the baby boomer who, perhaps frustrated by the increasingly common wait to receive their inheritance, seemingly took matters into their own hands.  By value, 72% of familial fraud was committed by fraudsters aged over 45.

Hitesh Patel, UK Forensic Partner at KPMG, said: “Fraudsters in the family are abusing their intimate knowledge and close connections to steal from partners and parents.  People are living longer, and we are seeing examples of people who are choosing to remove uncertainties about when or if they will get their inheritance by fraudulent means.  It’s also likely these cases are just the tip of the iceberg – frauds of this nature often go unreported as embarrassed victims seek to ‘keep it in the family’ and ‘forgive and forget’.”

In one such case a woman stole her father’s savings after being granted power of attorney, leaving his care home bills unpaid.  In another, a man stole his mother’s £600.000 savings after realising he was not the main recipient in her will.

KPMG notes that Power of Attorney registrations have more than doubled in the last four years, with almost 350.000 registered in the financial year ending April 2015, up from 150.000 in 2011.

The march of the middle men

KPMG’s Fraud Barometer revealed a substantial rise in supply chain fraud, as criminals pass themselves or their products and services off as genuine.  Customers were often unaware that they had been tricked by an imposter or that they had bought counterfeit goods.  This type of fraud accounted for £99m in the first two quarters of 2015, an increase of £70m on the same period last year.
In one case the defendants are alleged to have set up fake government websites to dupe people into handing over money for administrative services for which the end consumer did not in fact have to pay.  The losses are thought to total £30m.

Hitesh Patel commented: “Criminals are inserting themselves into the supply chain, and unwitting buyers often genuinely do not realise they are dealing with an intermediary when they do not need to, as a result of misrepresentation. This issue has been aggravated by the sheer volume of transactions conducted online.  Criminals are inherently adaptable and have seamlessly moved with the times, adapting the way in which they target victims to take advantage of advances in technology and anonymity afforded by digital commerce.”

Keeping up with the Joneses – by any means necessary

KPMG’s Fraud Barometer also revealed a surge in white collar crime, with those in a position of responsibility or management abusing their power to commit frauds totalling £262m, an increase from £72m last year.  Such individuals included an MEP and the head of operations at the Royal Horticultural Society.  In the latter case, the perpetrator stole £700.000 from his employer, in the form of goods, services and cash over a number of years.

Hitesh Patel commented: “These white collar fraudsters often shelter in the business’ inner sanctum and can quietly wreak substantial financial havoc before their actions are uncovered.
In the majority of cases the fraudsters’ motivation is simply one of greed as they seek to subsidise their high octane lifestyle at the expense of their employer or clients.  These are often crimes of opportunity, made possible and tempting in the upper echelons of a business if blind faith and trust are a proxy for controls.”

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