The South West has seen fraud cases worth £5.4million dealt with in court in the past year – with a “tsunami” of new cases expected in 2021.
The 12 cases brought before judges in 2020 was a 37% drop from 19 in 2019, when the value of money embezzled was £8.5million.
But experts at accountancy giant KPMG believe the drop was because the court system was slowed down by the coronavirus pandemic, and expects the number to rise. The company is also anticipating a surge in cases stemming from abuse of Covid payments such as the furlough scheme.
The value of fraud cases may have fallen by 36% in 2020 but two fraud cases in 2020 were for a value of £1million and the average value per case, between £250,000 and £1million, being higher than compared to 2019.
There was also a shift in the type of perpetrator committing fraud, with women being involved in half of the cases, compared to less than a quarter of cases in 2019.
Commercial businesses remain the most common target in these fraud cases, targeted in nearly all cases by their own employees. These criminals tend to be middle-aged or older.
Among the cases, a man posed as a supplier in a “sophisticated attack on a major business” and was found guilty of a £459,000 fraud. Police warned that criminal groups have “become much more sophisticated” in carrying out this type of fraud.
A woman who admitted stealing £437,000 from her employer "out of pure greed" to finance her house build and a "lavish lifestyle"was jailed for five years. She was found to have abused her position as financial controller over a two-and-a-half-year period, during which she concealed her thefts within legitimate business transactions.
Another woman was found guilty of stealing more than £100,000 from her employer to fund her gambling addiction. She was found to have abused her position as senior finance manager, which gave her “unlimited access to company finances”.
Damian Byrne, forensic lead for KPMG in the South West, said: “It is unlikely that the reduced levels of fraud cases heard in the South West’s courts during 2020 compared to 2019 is due to lower levels of fraud activity in the region, but rather due to the legal system operating more slowly despite the hard work of the courts, including a shift to remote hearings.
“The Covid-19 pandemic has increased fraud risk for individuals, businesses and the Government itself, with the different environment increasing the opportunities for fraudsters in a variety of ways. During these challenging times, it is important that businesses and individuals stay alert for signs of fraudulent activity.”
Nationally, 2020 saw a record fall in the value and volume of alleged fraud cases heard in courts, according to KPMG’s annual Fraud Barometer.
The Barometer, which records fraud cases of more than £100,000 reaching courts, reported a 51% drop in the volume of cases heard – a total of 180, compared to 369 in 2019 - as Covid-19 lockdown restrictions negatively impacted the efficiency of courts. The COVID-19 pandemic saw the value of alleged fraud cases reach just under £724million, down from £1.1billion in 2019.
Roy Waligora, head of Ƶ investigations at KPMG said: “As we reflect on the 2020 fraud data, the brewing backlog of untried cases continuing to build up like water behind a dam cannot be ignored.
“Businesses and the general public must be cognisant of the fact that the drop in both the value and volume of fraud cases is not reflective of a downturn in economic crime, but rather fallout following the COVID-19 lockdown restrictions on the courts.
“Covid-19, coupled with Brexit, which tipped the scales towards the end of 2020, means that 2021 will remain at high risk for fraud and economic crime. While a tsunami of fraud is still expected to hit the courts in 2021, it is evident that progressive measures, such as virtual courts, being put in place to manage the upcoming cases will likely ease the backlog.”
Procurement, loan and mortgage, counterfeit goods, and misappropriation of assets fraud, were the busiest areas for fraud in 2020, KPMG found.
Procurement fraud rose by 200% compared to 2019, from £16million to £49million. The value of loan and mortgage fraud ballooned 675% from £9.7million to more than £75million with the number of cases falling by one.
While the number of cases dropped from 19 to five in the 12-month period, the value of fraud secured through counterfeit, pirated or below stated quality goods activities rose over 415%, from £39million to more than £202million.
Tax fraud, including tax refunds, evasion of duty, evasion and VAT fraud fell by 93% from £721m to £54million over the same period.
Romance fraud, where cases often link to the online dating practice of “catfishing”, halved in value; but the number of cases remained constant.
In one case, a serial fraudster convinced women he had met through a dating app to give him £440,000 under the pretence that he was a successful currency trader who could invest their money which he used to fuel his lavish lifestyle.
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Fraud cases with addiction listed as the purported motivator rose from 16 to 21 and grossed more than £7.3million in 2020, compared to £7.5million the previous year.
Perpetrators scammed eBay users, stole from employers, churches, government benefits, charity and there was even an attempt to blow up a cash machine – all to fund gambling or drug addiction.
Mr Waligora said: “The rise in addiction-related figures suggest that indications of the mental toll of lockdowns are beginning to emerge in our data, as more spare time leads to greater susceptibility to addiction and increased financial pressures.
Motivation for committing fraud is specifically expected to increase as a result of the economic conditions, KPMG said with furlough-related fraud expected to make its mark in 2021. The National Audit Office, indicated that more than £3billion in furlough money may have been stolen by October 2020.
The British Business Bank, responsible for overseeing the state-backed lending programmes Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS), identified £1billion of fraudulent loan requests with more on the horizon.
In some cases, organised criminal gangs hijacked claims by taking the identities of taxpayers, in others, employers claimed payments but continued to keep employees working. The full scale of this fraud could result in losses of up to £26billion for the taxpayer, KPMG said.
