Cost of fraud rises to pounds 120m

Click to follow
The Independent Online
THE UK suffered 55 cases of fraud worth more than pounds 100,000 last year, according to figures published yesterday by forensic accountants at KPMG. The number of cases represents a significant drop on the 74 recorded in 1996, but the total value of the frauds is up 27 per cent, from pounds 95m to pounds 120m.

The accounting firm has recorded 616 cases of fraud of more than pounds 150,000 - costing a total of pounds 3.6bn - over the past decade. The peak was in 1995, when pounds 1.2bn was defrauded, it says.

The banking and financial sector was the most significant victim, suffering 18 individual frauds of more than pounds 100,000 with fraud against investors soaring from 1996's pounds 4m to pounds 73m last year. The increase was mainly due to a small number of cases where false promises were made to investors concerning the high profits that could be made from complex instruments that were little understood. In 1996, the chief victim of fraud was the Government.

The findings come days after a report from another leading accountancy firm indicated that, while fraud is often not discovered until a downturn in the economy, it is often perpetrated at times like the present, when business is booming.

Adam Bates, fraud investigation partner at KPMG's forensic accounting arm, said that although the current cost of fraud in the UK was lower than in the early 1990s, it was still "a very considerable amount".

He added: "Frauds result largely from poor internal controls. Organisations and companies must be reminded that they have to keep a strict eye on these controls, and not be lulled into a false sense of security."

He also warned companies to assess fraud risk on an international basis since the opening of world markets was creating significant opportunities for fraudsters as well as for business. "An increasing amount of our work includes international assignments," he said.

The importance of this aspect of work was demonstrated when the KPMG accounts published earlier this year showed a 47 per cent increase in forensic accounting work in the final three months of 1997, compared with the same period the previous year.