Fraud value takes a dive

A report published by KPMG suggests that the value of fraud dropped to £192 million last year, compared with a figure of £667 million posted in 1999 – a decrease of 71%, and the first time since 1996 that reported cases of fraud have not increased year-on-year.

Research carried out by KPMG's Forensic Accounting Division into major fraud cases in the UK courts (ie charges over £100,000 in Crown Court for the twelve months up to 31 December 2000) show that the average value of each case has dropped from £9.4 million in 1999 to £3.1 million. The number of fraud cases has also fallen – from 71 to 62 by the end of 2000.

However, the figures belie the true extent of fraud cases. Jeremy Outen, fraud investigation partner at KPMG Forensic Accounting, told SMT: "2000 was a record year for our fraud practice. The figures we've unearthed seem to suggest that fraud victims are trusting more to the private sector than the Court system to pursue their cases." Interestingly, company managers represented the most cases (34 out of the 62 reported), and formed one of the defendants in 25 of the 62 cases. "The business environment often puts immense pressure on managers to produce results," added Outen. "This can so easily add to the risk of fraud." Commercial fraud was the largest category in 2000 (amounting to 43% of all cases), just beating public sector fraud (37%) into second place. The former is up 11% from 1999 at £82.2 million.

"Fraud prevention techniques must be embedded as part of any businesses' culture," stressed Outen. "A culture of awareness and prevention must be rife throughout a company. That's the responsibility of the Board and the security team."

The University of Leicester's Scarman Centre has joined forces with Andersen's Fraud and Intensity Risk Group to launch a study on the threat of money laundering.

Conceived by the Centre's Dr Martin Gill, the study will include an industry-wide survey which begins this month, as well as interviews with a sample of Financial Services Authority (FSA)-regulated companies in different sectors – including banking, securities, insurance and asset management.

The sheer scale of money laundering is staggering. Back in 1999, the United Nations Human Development Report stated that organised crime generates $1,500 trillion every year (laundering the 'proceeds' avoids the risk of confiscation), while the International Monetary Fund estimates that money laundering by criminals worldwide is worth anything between 2% and 5% of total world GDP.

"Organisations like the Basel Committee and our own FSA are advocating a risk-based approach to dealing with the problem," said Martin Gill. "This latest study should allows us to better understand what companies perceive to be the main threats, how they can actively respond to the risk of money laundering and what tools are available to help corporate concerns defend themselves in both the short and long term."