Big-money scams rocketing in Yorkshire as firms crack down

The value of reported fraud nationally rose to more than £2bn, a 50 per cent increase on last year’s figure, according to accountancy firm BDO.

In 2011 there were 413 reported cases, at an average value of £5m, compared with 372 in 2010, with an average value of £3.7m.

Across Yorkshire and the North East reported fraud increased six-fold to £330m compared to £51m for the same period last year.

The figures for this region are the highest outside London.

The report pinpoints 38 fraud cases from Yorkshire last year, 26 of which originated in West Yorkshire.

Cases reported include a “Ponzi” investment scheme that targeted British expatriates living in Mallorca and a Doncaster-based car theft scam valued at £2.5m.

Simon Bevan, Leeds-based partner and head of fraud at BDO, said: “The fact that reported fraud is up is worrying, but not at all surprising.

“When the economic climate is difficult there is even more focus on the bottom line and driving out unnecessary costs, so fraud is more likely to be uncovered.”

But he said organisations needed to be more active in preventing fraud, as in-house fraud risk teams were often too narrowly focused on external criminals rather than fraudsters within their own ranks.

In the finance and insurance sector, fraud had fallen and now accounted for 27 per cent of all reported fraud in 2001, compared to 56 per cent in 2010.

Commenting on this sector, Mr Bevan said: “Financial services institutions have invested heavily in systems and technologies to prevent and track fraud, so the fact that reported fraud in this sector has decreased as a percentage of overall fraud suggests this approach is working.

“But there is still a long way to go. The most serious frauds, in terms of financial loss, in financial services are often committed by employees and management. Yet most of the in-house fraud teams within banks etc tend to be made up of ex-policemen.

“They are often too focused on external ‘criminals’ dealing with credit card fraud, phishing etc., when the greatest risk is internal with banks employees committing commercial lending, mortgage or rogue trading fraud. It is this failure to take a holistic approach to tackling fraud that can lead to those high profile, costly incidents that we have seen in recent years.”

Nationally, both employee and management fraud have fallen dramatically, according to BDO.

“Management fraud has gone from 31 per cent in 2008 to only 5.5 per cent this year,” added Mr Bevan. “We believe this is a reflection of the fact that whistleblowers tend to keep their heads down at times of high unemployment.”

BDO’s Fraud Track report, which collates data from all reported fraud cases over £50,000 between December 2010 and November 2011, also highlights a boom in reported fraud in the retail sector.

Retail now represents 12 per cent of all fraud committed, compared with just two per cent the year previous.

Tax fraud accounts for the highest percentage of fraud committed, at just over 36 per cent.

The second largest offenders are suppliers and customers, which represent 30 per cent of all fraud at an average cost of £7.7m.

Employee fraud is down to 10 per cent from 14 per cent last year, but cases of corruption are steadily increasing from less than one per cent in 2009, to just under two per cent in 2010 and four per cent in 2011.

Mr Bevan said the retail sector was vulnerable to fraudsters.

“The hike in retail sector fraud represents a vulnerable industry, especially given the current economic climate.

“Given that almost a third of fraud is undertaken by suppliers and customers, it is not surprising that this sector has been so dramatically affected. Tackling fraud can have a real impact on the bottom line and this should be a priority for retailers in these tough times.”