Spot the scam: How to protect yourself against fraudsters
Saturday 25 July 2009
Arecord number of serious fraud cases hit the courts in the first six months of the year. KPMG's "Fraud Barometer" revealed that there were 163 charges of serious fraud – where more than £100,000 is embezzled – in the first half of this year, with a combined value of £636m. The figures are the highest in the 21 years that KPMG has been tracking the data. Worryingly, more than half the money – £321m – was stolen from investors, with the Government and financial institutions losing £153m and £111m respectively.
The figures are just the tip of a massive iceberg as tricksters have been upping the stakes in their attempts to swindle people out of their cash. The most high-profile fraud case of the year broke this week when City of London Police revealed that some 600 well-heeled investors have been taken for £80m in what is believed to be the biggest-ever, get-rich-quick Ponzi-style pyramid scheme to hit the UK.
The police said the sting was so successful that many investors refused to believe they'd been ripped off. Victims of the gang of Ferrari-driving fraudsters are thought to include former England cricketer Darren Gough, pictured.
The scheme was set up by a Knightsbridge-based company called BCI. It targeted wealthy people by offering extremely generous returns of up to 13 per cent a month. The company claimed the dividends were generated by lending to struggling companies that were willing to pay high rates of interest on loans. In truth, investors' money funded the payments to other investors in a classic pyramid structure. With all such schemes, the whole thing unravels when fraudsters can't find fresh investors to fund payments to existing members.
The crooks prey on people's greed when setting up their cons and, at a time when money is tight, it's easy for even the most cautious among us to get caught out. KPMG says professional gangs are out in force looking for targets. Hitesh Patel, partner at KPMG Forensic, says: "The figures are bad, but the worst is yet to come. It will be a number of years before the impact of the recession fully feeds through into the fraud statistics. Hard times mean more people driven to fraud by personal pressures, and more investors willing to believe in cooked-up investment schemes."
The biggest case that has come to court this year was a £200m swindle involving the attempted fraudulent sale of the Ritz Hotel in London. But not all cases are aimed at the obviously wealthy.
A large buy-to-let fraud in the North East earlier this year conned around 2,000 investors out of £80m, after they were persuaded to invest an average £40,000 each in properties which often turned out to be little more than derelict shells.
Other fraudsters target the companies they work for, or insurance firms. A construction company secretary in Merseyside claimed she had cancer so that she could take compassionate leave from work. She spent her time off getting plastic surgery and taking holidays with some of the £600,000 she had stolen from the company and a previous employer by paying wages into her own account.
Meanwhile, a social worker in the North West made up an entire children's home called Cherrywood. She authorised a number of payments for the home and its "staff" into her own bank account, taking over £600,000 of public funds over a period of five years.
In a landmark case earlier this year, an insurance company hit back at a fraudster by taking her to court for contempt. Joanne Kirk, of Preston in Lancashire, was convicted of contempt of court following a road traffic accident with a customer of NIG, an RBS-owned insurer that offers policies through brokers.
Mrs Kirk, who was seeking compensation of more than £800,000, had her claim slashed by the courts to £25,000 after NIG produced photographic evidence of her shopping and filling up her car with petrol, despite her protestations that she was hardly able to walk.
In fining her £2,500 and awarding costs to the insurer, Justice Coulson ruled that Mrs Kirk "exaggerated her symptoms to a significant and unconscionable degree" and can have had no "honest belief" that much of her claim was true.
Allan Clare, head of financial crime at NIG, says: "Anyone considering committing fraud, whether they be our policy-holder or third parties, will now have to face very serious consequences beyond the main personal injury action for dishonestly inflating a claim.
"With fraud adding around £40 to an average insurance premium, any measures which make fraud less attractive to fraudsters is good news for honest policy-holder."
The battle against fraud continues with police and specialist fraud departments working together to detect and convict crooks. But there is also a personal responsibility that we all bear to be on guard against becoming a victim. When presented with any money-making scheme it should be obvious if it's suspicious, but it's worth reminding yourself to be alert.
Brian Dennehy, managing director of investment experts Dennehy, Weller & Co, says: "There are always fraudsters out to dupe investors, but there are usually some giveaway signs, for example the promise of unrealistic returns. If anyone offers returns much higher than the building society, say 5 per cent and above, and claims such returns are secure or guaranteed, be very wary."
He also warns about the danger of relying on word of mouth. "It is often said that a personal recommendation is preferred, but the reality is that a plausible conman is highly effective at building trust and encouraging just such recommendations."
Another rule that Dennehy sticks to when investing is this: if you don't understand something, don't invest. "You must ask detailed questions and expect clear answers," he advises.
It's also a very good idea to check someone's credentials and whether they are authorised to give you investment advice. You can check an individual's or firm's standing at the Financial Services Authority's register on its website www.fsa.gov.uk, or by calling 0300 500 5000.
It's not only investors who can be hit by fraudsters, and sophisticated cyber-crooks are finding their victims online, stealing their identities to run up debts or even clean out victims' bank accounts. In the last two weeks, for instance, there's been a spam email popping up in inboxes claiming to be from Inland Revenue & Customs and promising the chance of a tax rebate.
With the upcoming 31 July self-assessment tax deadline on people's minds, it could be easy to click on the link in the message. But doing so will be playing into the hands of the fraudsters. HMRC says it will never send out such an email to people. Similar emails from other government bodies or financial institutions asking for personal details or for you to click on a site will always be cons.
Andrew Hagger of Moneynet.co.uk says some simple financial housekeeping could help keep fraudsters at bay. He says that crooks try to target dormant accounts or old credit cards that people may have forgotten all about.
"For example, if anyone moves house, it's easy to forget about an old credit card that you don't use now the 0 per cent deal has ended," he says. "But in 12 or 18 months' time when the card expires, a replacement card will be sent to your old address, which is an open temptation to a fraudster.
"It is the same situation with current account or savings statements; you don't want to make life easier for someone to steal your identity." In other words, be sure to close any accounts that you no longer need, otherwise you could become easy prey yourself.
The holiday season can leave people even more open to the charms of a crook, warns David Alexander, a forensic accountant and director at Smith & Williamson. "People are probably at greater risk from fraud when travelling abroad – not least because there is a tendency for them to let their guard down while relaxed and in a holiday mood, therefore putting them at high risk of fraud," he says.
To protect yourself, he suggests using cash rather than plastic abroad. Also, don't take all your credit and debit cards with you, only those you need, and make a separate note of the card numbers and the provider's telephone number to report lost or stolen cards. Finally, before you travel, call your credit card provider and let them know your travel plans.
Identity fraud: How to protect yourself
"It can only take three pieces of information for a fraudster to be able to steal someone's identity, open accounts in their name, rack up huge debts and then leave the victim to foot the bill," warns Neil Munroe of credit report company Equifax. He advises doing the following to reduce the chance of becoming a victim.
* Be careful of what you carry around in your handbag or wallet. Credit card receipts, payslips, driving licences, bank statements, utility bills... these all reveal a lot of information about you and a combination of these can be a fraudster's dream.
* Shred statements, bills and mail which contains personal information.
* When using online banking, ensure people can't view your details and log out of the website, rather than just closing the window.
* Use the privacy settings on social networking sites.
* If you are disposing of an old computer, make sure you destroy information on the hard drive.
* Redirect your mail if you move house.
* Keep your PIN numbers secure.
* Always check bank statements and credit card statements carefully against receipts.
Money Insider: Borrowers can cry mortgage freedom
Buyers beware of new-build home headaches
Women born in 1950s facing severe financial hardship over pensions could have fates changed by Ros Altmann - should she choose to help
Five Questions On: GB Energy's new tariff
Money roundup video: Warning for mortgage borrowers and Premium Bonds boost
- 1 Autistic adults could take pure MDMA to 'reduce social anxiety'
- 2 Natalie Portman tells Harvard graduates: 'Accept your lack of knowledge'
- 3 Before you complain about your GP, this is what you need to know about actually doing the job
- 4 Father of 12 accused of raping, beating, starving and abusing his own children in US 'cult'
- 5 Charlie Charlie Challenge explained: not a Mexican demon being summoned — it's gravity
EU referendum: David Cameron's rules are a 'democratic disgrace', says French-born Scottish politician set to be denied a vote
The day that Britain resigned as a global power
SNP fury as HS2 finds 'no business case' for taking fast train service to Scotland
Australian man punched in the face for defending Muslim women from abuse on train
A nation of inequality: How the UK is failing to feed its most vulnerable people
EU referendum: David Cameron to deny EU migrants and under-18s the chance to vote
iJobs Money & Business
£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...
£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...
£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...
Day In a Page
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool