2011 was a great year for fraudsters

2011 was a very good year . . . for fraudsters. The annual report from accounting firm KPMG says that fraud in the UK was up by 150% over 2010, with over 70% of cases reported in the second half of the year. KPMG’s Fraud Barometer, which has been monitoring scams for 25 years, came up with that startling statistic as a result of the recorded number of cases of alleged fraud involving businesses and private citizens.

Between July and December, the Barometer found cases of fraud amounting to £2.5 billion, including five cases that involved more than £50 million each. All told, 2011 has the dubious honour of being the worst year for fraud theUKhas ever seen, with a total of approximately £3.5 billion; about 75% of that amount was allegedly perpetrated by the management of the defrauded companies.

The report noted that although the number of cases of management fraud was about the same as the previous year, the amount came to £729 million, as opposed to £420 million in 2010. KPMG forensic partner Hitesh Patel said that he had never seen such a high level of management fraud in all his time with the firm. Patel said the explanation involves several factors, but economic uncertainty is the basic underlying cause.

Both government austerity measures and operational changes have uncovered more of the scams that are being run, through the use of improved security and more intense scrutiny. At the same time, the economic downturn has been a catalyst for increased fraud, as individuals and companies look for ways to boost their income – or just to survive.

However, the large majority of reported fraud is down to professionals criminals – those who use their knowledge of advanced technology for personal profit with no regard for the businesses and individuals who suffer the consequences.