The number of alleged fraud cases exceeding £100,000 reported in the media being heard in Scottish courts has risen dramatically in the first half of 2022.
KPMG UK’s latest Fraud Barometer showed that 14 cases with a total value of £14m reached Scottish courts in the first six months of the year – an increase of 443% compared to the same period last year, when £2.6m was defrauded.
Totals so far this year have also surpassed the full year value for 2021, which was £5.9m across 16 separate cases.
The general public were the most common victim, by both volume and value, during the first half of the year, suffering fraud losses of £8.7m across six cases.
The second highest victim type by volume were commercial businesses and government, being the victim of three cases each.
By value, financial institutions were the second highest victim type, suffering fraud losses of almost £3.3m across two cases.
The most common fraud type by both volume and value was cash and equivalent instruments fraud, such as counterfeit money and debit and credit card theft, with three cases having a combined value of £9.3m.
Most cases had a value of between £100,000 and £250,000 - although one case involved a Scottish man scamming £7m from a US Bitcoin broker.
Annette Barker, head of KPMG Forensic in the UK, said: “The dramatic increase of fraud cases coming to light in Scotland is worrying, particularly with many cases involving rogue employees abusing their positions of trust to steal money from their employers, clients and other partners.
“Businesses must do all they can to maintain adequate controls to prevent serious fraud from being committed - without the right safeguards in place, businesses across Scotland will unfortunately continue to be victims of crime and incur the reputational and financial damage which comes with it.”
Case studies to reach Scottish courts during the first half of this year include:
- A Dundee businessman, who set fire to his own family business in a bid to carry out a £1.75m insurance scam, was jailed for 13 months.
- The managing director of an Alloa based engineering company, who siphoned £100,000 from the firm to feed a gambling habit, was jailed for 18 months.
- A businessman from East Dunbartonshire, who scammed £736,000 worth of goods from a large retailer by exploiting a gift card loophole, was jailed for 33 months.
Across the UK as a whole, the total value of alleged fraud, exceeding £100,000, reaching UK Crown Courts in the first half was £532.6m - up 288% from £137.4m year-on-year.
This is above the total value of alleged fraud seen in Crown Courts during the whole of 2021, which reached almost £445m.
Despite this leap, figures from KPMG revealed that the volume of fraud cases reaching UK Crown Courts in the first half of this year was slightly lower than the same period in 2021, having decreased from 149 cases to 129 cases – a fall of 13%.
This demonstrates that the courts remain under severe pressure to resolve fraud cases, which became backed up during the peak of the pandemic and will continue to accumulate as the country deals with new crises that fraudsters will inevitably exploit.
Roy Waligora, head of UK investigations at KPMG, said: “Fraud cases continue to stack up and UK Crown Courts are struggling to make headway in prosecuting these criminals.
“A positive announcement of a new Public Sector Fraud Authority was announced in the Spring Statement, with a funding injection of £24.7m to crack down on criminal gangs who rip off the taxpayer, but if it takes years for fraudsters to be prosecuted because of the case backlog, it will be some time before the impact of this initiative is felt.”
In June, industry body UK Finance said that the UK is experiencing an “epidemic of fraud”, with the value of fraud allegedly carried out on the general public rising 74% to £75m during the first six months of this year.
For the first six months of 2022, Financial Institutions had the most fraud cases reach UK Crown Courts by value, at a total worth of £305.2m for nine cases, up from £6.9m for 13 cases during the first half of 2021.
Waligora said: “Customers see the role of financial institutions as keeping their money safe and do more to prevent fraud, but the latest data suggests that this is a real challenge.
“In tandem, customers expect a certain level and speed of service, which could be hindered by additional fraud prevention measures, such as Strong Customer Authentication, introduced in March this year.”
Money laundering cases were by far the most significant type of fraud in terms of value, at £297.6m for seven cases in the first half of 2022, rising 16,781% from £1.8m for five cases in the first six months of 2021.
This was largely due to a single high value case of £266m, where money was laundered through a company bank account and the proceeds used to purchase gold over a period of two years.
Triggered by Russia’s invasion of Ukraine, the newly passed Economic Crime Act and a second Economic Crime Bill that is expected in the coming months, contain measures designed to increase transparency and give law enforcement enhanced powers to combat money laundering.
They also provide law enforcement with enhanced anti-money laundering powers to encourage businesses to share information on suspected economic crime. As a result of this legislation, in the short term there is likely to be an uptick in this kind of fraud reaching UK Crown Courts as more of this type of crime is identified.
Other KPMG findings include:
- Embezzlement was the most common type of fraud reaching UK Crown Courts, with 18 cases in the first half of 2022 - although this was down from a total of 26 during the same period in 2021.
- Advance fee fraud, when fraudsters target victims to make advance or upfront payments for goods, services and/or financial gains that do not materialise, has jumped from two cases in the first half of 2021, worth £1.2m, to nine cases in during the same period this year, worth £11.6m.
- Fraud carried out by employees went down by nearly two thirds in terms of volume, from 38 to 14, and nearly halved in value from £20.1m to £10.7m.
- But fraud carried out by management rose from £23.3m for 31 cases in the first half of 2021, to £110m for 34 cases in the first half of this year; an increase of 372%.
- Fraud allegedly perpetrated by a private individual jumped from £1.9m for seven cases in the first half of 2021, to 14 cases seen in the first half of 2022, to the value of £26.2m. For example, a woman was jailed after blackmailing a wealthy businessman for £10m after she threatened to reveal private personal details about him to his children.
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