Fraud cases being heard surge 84 per cent in Midlands

Despite the lockdowns experienced last year, courts across the Midlands experienced a surge in the number of fraud cases being heard in 2021. The volume of cases increased by 84 per cent, from 25 in 2020 to 46 in 2021, while the value decreased by just one per cent, from £59.8m in 2020 and £59m in 2021.

Across the West Midlands, both the value and volume of fraud cases rose, from £36.3m to £43m, and from 13 to 26 cases, respectively. 18 of these cases were committed by males, accounting for £40.7m of the region’s £43m total, while females accounted for six of the cases worth a value of almost £1.7m. There were two cases committed by males and females with a combined value of £550k.

It’s a slightly different picture in the East Midlands, however, as the number of cases has increased by 67 per cent, while the value of cases has decreased from £23.6m in 2020 to £16m in 2021. Commercial businesses were the most common victim type, accounting for eight of the 20 cases heard in the East Midlands. The majority of these cases were committed by employees or management.

Julie Bruce, Forensic Director at KPMG in the Midlands, said:  “As courts across the region continue making their way through a backlog of cases, we’re now starting to see a glimpse of the true picture of fraudulent activity. The fact that the volume of fraud cases increased yet values dropped, albeit ever so slightly, could suggest that on the surface the trend of committing higher value crimes isn’t as prevalent as it has been in previous years. However, I believe it’s much more likely that this is down to the delay in cases reaching the courts, as challenging economic circumstances almost always serve as encouragement for fraudsters to take advantage.

“With household purse strings tightening and concerns over rising energy bills and inflation, we expect to see a spike in fraud cases reaching courts in 2022, and if the pattern we’ve seen so far is anything to go by, we could see a record year for fraud values and volumes. With fraudsters looking for every and any opportunity to strike, businesses and consumers need to stay on high alert and ensure protective measures are in place to help them to do so.”

Case studies to reach the region’s courts during this period include a Nottinghamshire-based surgery practice manager who pocketed £200k funds from his employer while claiming that the money was being spent on finding locum doctors; a gang of eight men pretending to be police officers who stole almost £200k from elderly and vulnerable victims across the West Midlands and a 46-year-old female from Stoke-on-Trent who took £107k of taxpayers’ money as part of an income tax scam from a series of falsified claims

The number of alleged fraud cases heard in UK courts in 2021 went up by 66 per cent compared to the same time in 2020. Despite another lengthy COVID-19 lockdown at the start of 2021, UK courts appear to have got back on their feet and made headway with the backlog of cases that built up because of initial COVID-19 measures.

Figures from KPMG UK’s Fraud Barometer released today, found 298 alleged fraud cases were heard during 2021 (up from 180 in 2020). Yet the opposite trend was seen in terms of fraud value: the Fraud Barometer figures, which records alleged fraud cases with a value of £100k and above, saw the total value of fraud reaching UK courts in 2021 fall significantly from £724m in 2020 to £444.7m in 2021.

Whilst cases in UK courts provide an indicator of fraud activity, these cases are small in the context of fraud crime reported to Action Fraud. Between 2020 and 2021 there were 875,622 reports made to Action Fraud with a reported loss value of £2.35bn, pointing out the stark reality that relatively few cases are brought to court.

When analysing the data in more detail, it appears that there weren’t any high value fraud cases over £50m last year, rather it was the lower value crimes that increased in both value and prevalence. Fraud cases worth between £100k and £5m rose from 164 in 2020 with a value of £100.3m, to a total of 285 in 2021 to the value of £178m.

Perpetrators of fraud continued to take advantage of the general public – in 2021, 93 cases of fraud were committed against a member of the public, to the total value of just under £116m, compared with 39 in 2020 totalling £33.3m.

Roy Waligora, Partner and Head of UK Investigations at KPMG, said: “With the introduction of the BEIS White Paper and heightened focus on fraud, I would hope that it has helped tackle the prevalence of high-value fraud. With increased controls, it is only logical that less of these crimes slip through the net. In 2020, there was a £200m film piracy case which accounted for 28 per cent of the fraud value reported, hence why there has been such a significant fall in fraud values. With new regulation and heightened awareness of fraud, I hope cases as catastrophic as that one will no longer be seen in the future.

“Another reason for the fall in value could be that more complex cases are still being delayed as a result of the pandemic or are still currently being heard in court, and we will closely monitor for this in next year’s data.”

Digital related fraud is on the up, and UK courts are cracking down

 When the pandemic hit, everyone’s lives were forced online, and the same was true for the criminal population. According to figures from The National Fraud Intelligence Bureau, 80 per cent of reported fraud is cyber enabled. The Fraud Barometer data revealed that fraud relating to cyberattacks or the trading of stolen data rose significantly from one case worth £9.2m in 2020 to five cases worth £22.6m last year.

The data also exposed a significant increase in the number of cases heard in UK courts pertaining to account takeover or payment transfer fraud. The volume of this type of fraud increased by 288 per cent, from eight cases in 2020 to 31 cases in 2021. The value of this type of fraud also grew from £8.3m in 2020 to £46.8m in 2021, a significant rise of 462 per cent. According to the Fraud Barometer data, account takeover or payment transfer fraud was the second most common type of fraud, second only to embezzlement, which had 51 cases heard in UK courts in 2021 (compared with 42 last year).

Roy Waligora added: “Criminals immediately exploited the new ways of working and living that were created because of the pandemic, causing a huge spike in online fraud. Sadly, many fraudsters have, and continue to take advantage of the unusual situation we find ourselves in, yet it is promising to see that some of these criminals have been brought to justice. While organisations and the public have been implementing more robust safety checks and preventative measures to curb this type of crime, I expect to see more cases of this variety included in the Fraud Barometer in the future.”

Some positive news in this regard was the successful prosecution of two international criminals (who were already on bail for money laundering offences) who fraudulently claimed £10m in Bounce Back Loans. They were jailed for a total of 33 years. They claimed up to £50k a time, making over £10m in total, with £3.2m coming from a single UK bank. They used various shell companies to commit their crimes.

The UK healthcare sector has continued to be ravaged by fraud, not only from external criminals, but from individuals working within the sector. The NHS Counter Fraud Authority estimates that the NHS is vulnerable to £1.14 billion worth of fraud each year, a bill inevitably picked up by the taxpayer.

In this year’s Fraud Barometer, there are several cases where hospitals and hospital trusts were the victim of either employee or management fraud. For example, one fraudster boss was found guilty of embezzling £200k over a three-year period from his GP surgery during the pandemic. Secondly, a gang, including one member who was an NHS employee, has been accused of stealing more than £322k from Worcestershire Acute Hospitals NHS Trust. There was even an accountant who defrauded several companies, including three NHS organisations he secretly worked for at the same time, out of £1.4m to fund his lavish lifestyle.

 Cases of fraud relating to insider threats became more prevalent in UK courts last year with a substantial rise in fraud committed by employees (66 cases in 2021 compared with 44 in 2020) and management (66 cases in 2021 compared with 21 in 2020). The most notable case was a male employee aged 25 who set up multiple fraudulent bank accounts on behalf of an organised crime group, which were then used to transfer the proceeds of a £30m scam against customers.

This trend is potentially linked to weaknesses in internal controls driven by the impact of COVID-19, as businesses grappled with new ways of remote working.