Fraudsters committed 21 cases at a cost of £96 million compared to the same period during 2009, where there were 18 cases worth just £24 million, making the fraud total for the year £77 million.
One of the biggest mortgage cases was worth £50 million, involving two solicitors charged with commercial mortgage fraud in relation to obtaining a money transfer by deception and dishonesty, while an estate agent was jailed for six years after attempting to pull off a £2 million mortgage fraud after stealing the identities of two homeowners.
“The fact that increasing amounts of mortgage fraud are being prosecuted is cold comfort for the financial services industry,” said Hitesh Patel, partner, KPMG Forensic.
“Clearly, more of it is coming to light and more will follow. It is highly probable that the issue is far bigger than our figures demonstrate,” he said.
He said this is a legacy issue for the banks from the pre-recession boom years when inflated house prices offered the opportunity for fraud.
“Banks will be hoping that they have uncovered most of their fraudulent loans the trend remains upwards and it could be some time before we see the peak,” said Patel.
Overall, the KPMG Fraud Barometer, which considers serious cases of fraud with charges in excess of £100,000 in the UK courts, found 166 cases of serious fraud in the first half of this year – the highest number of cases in a six month period in the Barometer’s 22 year history.
The cases had a total value of £608.5 million – down 4.3 per cent for the same six month period in 2009 (£636.5 million). However, the 2009 figures were inflated by one case worth £200 million on its own, whereas in this period the biggest case was worth £66 million, meaning that without this outlier the average value per case has risen.
On average, manager fraud was far more serious than employee fraud, with theft totaling £135 million compared to £45 million, or over £4 million per case compared to £1 million per employee case.
For example, one Birmingham finance boss manipulated the profits of a steel supply firm to ensure a bonus by falsifying the company’s accounting records. He spent over £100,000 at a local lap dancing club, and by doing so 11 redundancies had to be made at the firm, which was nearly bought to its knees as a result of his actions, said KPMG.
Professional criminals perpetrated the most fraud during the period with 56 cases reported at a value of £391 million, over half the total amount included in the Barometer.
Government was targeted in 38 cases worth £178 million: a number of government frauds were tax scams involving benefits, VAT, or carousel fraud.
Patel said: “At a time when the country has a huge deficit, it’s clear that government needs to do all it can to protect itself from fraud and claw back lost funds. It becomes a problem that affects us all. Contrary to popular perception, fraud is not a victimless crime, particularly at a time when social welfare and infrastructure budgets need to be carefully protected. Any losses to fraud are losses from those budgets.”
Regionally, London and the South East remain the biggest hotspot for fraudsters – the region accounts for over half of the total cases (88), which equates to a staggering 81 per cent (£493 million) by value. The North East is its nearest rival, with 26 cases reported at a value of £43 million, said KPMG.
