Called 'advance fee' fraud, it involves conmen falsely promising to arrange loans in return for an up-front arrangement fee for companies in financial difficulties. No loan materialises, and the conmen disappear.
Fraud squads in other parts of the UK have also seen a rise in the crime, which is often committed by an international network of criminals. One police officer on Merseyside said: 'The deception is becoming increasingly elaborate. Large companies can withstand the losses but not the embarrassment, so they are reluctant to tell us.'
In London alone, 14 cases are awaiting trial and 20 people are under arrest in connection with other incidents. At least another 20 individuals or companies are being monitored. Scotland Yard's Fraud Squad's specialist unit has about 15 officers - 5 per cent of the squad's resources - assigned to it.
Businessmen whose companies are struggling in the recession are the most susceptible, particularly if they cannot raise capital through banks and other conventional sources.
Some companies have handed over fees of up to pounds 300,000 for multi-million-pound loans that were not advanced. Frequently, businessmen answer advertisements claiming that loans worth millions are available for specific investments. But some of these adverts turn out to have been placed by fraudsters based abroad.
Of particular concern is the growing use of fake US Treasury bearer bonds as security against promised loans.
Howard Jones, acting Commander of Scotland Yard's fraud squad, said: 'This is a departure from the more common cases of advanced fee fraud. The paperwork and time that goes into persuading the victims involves taking in lawyers as well as businessmen. We are not just talking about small companies being conned.' He said confidence tricksters have used more established financial agents in Britain to give credibility to the scam.
The increased powers granted to investigators under the Police and Criminal Evidence Act have helped to bring more cases to court.
Acting Commander Jones said, however, that this was only part of the story. 'We are uncovering more cases because we have more powers, but the crime itself is rising. We are investigating more advance-fee fraud than we ever have, largely because legitimate funding is more difficult to come by in recession.'
Jonathan Wooller, a management consultant and senior partner at the Project Partnership, said he had seen a number of clients seduced by promises of loans at interest rates well below UK levels. 'The set-up can usually be traced abroad, where it is difficult to check that it is all legitimate. Businessmen see the deal as a fantastic way out of their problems and get sucked into parting with cash up front. In my experience, few people bother to report the crime because too often the offence looks like a deal that has gone wrong, rather than a fraud.'
He said there was an urgent need to tighten up on the law governing advertisements for loans. 'Rarely are checks made to ensure the loans are being offered from bona fide companies,' he said.
Scotland Yard was this weekend holding six foreign businessmen suspected of carrying pounds 20m worth of forged US Treasury bonds. They had been arrested after allegedly attempting to obtain millions of pounds from an unnamed bank in south London.Reuse content