Volume of fraud cases hitting courts doubles

The number of alleged fraud cases being heard in UK courts in the first half of 2021 has almost doubled compared to the same time in 2020, as UK courts saw a continued recovery in the system following Covid-19 lockdowns.

Figures from KPMG UK’s Fraud Barometer, found 151 alleged fraud cases were heard in the first six months of the year, as courts used a mix of virtual and face-to-face sessions to start the catch up with the backlog created by COVID-19 restrictions. Government figures stated in June this year that at the end of Q1 2021 there were over 59K outstanding cases for Crown Courts and just under 400K for magistrates’ courts.

The Barometer figures, which record alleged fraud cases – not including online fraud – with a value of over £100,000, saw the total value of alleged fraud reaching UK courts in the first half of 2021 fall significantly (70%) year on year, standing at £139.1 million.

Commenting on the findings, Roy Waligora, Partner and Head of UK Investigations at KPMG, said “Despite the courts struggling with the impact of lockdown and COVID-19 restrictions, attempts to break through the backlog of fraud cases in the system are progressing. The legal system, like much of the world, has adapted quickly to adopt technology to help alleviate the huge numbers of cases that were put on hold last year when the pandemic first hit. To give a feel for the previous levels we have seen, the first half of 2019 saw fraud values of over £319 million and in the same time in 2018 we saw over £895 million.”

“Whilst the number of alleged fraud cases reaching court is significantly up on last year, no super-cases have been recorded in the data, which may point to more complex cases being delayed.”

The extraordinary conditions created by the pandemic saw professional criminals take full advantage of the general public according to the figures. Cases that involved the UK public being the victim increased by 285% to 50 cases in the first half of 2021 (£43.1 million), compared to just 13 cases heard over the same period in 2020 (£22.6 million).

Cases relating to rogue tradesmen more than doubled in volume and were valued at £2.5 million in the first half of 2021, mostly involving elderly and vulnerable people who were scammed for unnecessary work or paid for services that were then never delivered. This spike is potentially a result of an absence of family members or carers who would usually offer support or financial advice on these matters.

The figures also reveal 10 cases involving probate worth over £3.3 million in the first half of this year, where there were only four cases in the first half of 2020 totalling £2.3 million.

Meanwhile, 16 cases involving account takeover worth over £8 million appeared in court, with the majority of these cases related to professional criminals who took advantage of newly captive audiences at home. In one case, a gang leader was jailed for six years for conning 15 people of over £200,000, including a 96-year-old victim, into handing over their savings. The gang called victims claiming to be officers and persuaded them to protect their savings by moving the money to a temporary safe account – in reality, one controlled by the crooks.

Roy Waligora said “Professional criminals have seized on the opportunities created by the global pandemic to target victims in their own homes. From phishing and text scams to posing as banks to get unsuspecting customers to allow their accounts to be taken over – having a captive audience at home during lockdown has provided the perfect opportunity for unscrupulous criminals to take advantage.”

“During the pandemic there were a number of consumer campaigns to raise awareness of scams that were doing the rounds, but professional gangs are adept at moving on to the next big scam quickly. Keeping consumers alert and educated on the new types of scams coming through remain crucial in the fight against organised criminals.”

In total, 36 cases of alleged fraud worth more than £55 million targeting the government appeared in court in the first half of 2021, compared to £78 million across 19 cases in the same period of 2020. Two large cases were seen in the first half of 2021, one £12 million counterfeit currency case and the other an immigration fraud totalling £20 million.

This reported value of fraud suggests a start is being made but still seems relatively small compared to perceptions of high fraud levels for COVID-19 financial support. According to the latest Public Accounts Committee Fraud and Error Report, the Bounce Back Loan Scheme initiated by the government to support businesses through the pandemic, could potentially see up to £27 billion never repaid due to fraud or credit risks. With the dropping of basic fraud and error checks when paying out COVID-19 loans, the report points out the exposure to fraud has increased significantly and a rise in such cases in the near future is strongly anticipated.

The Fraud Barometer figures are also starting to see the first cases of furlough fraud for over £100,000. In one case, HMRC arrested a man and a woman in West Yorkshire on suspicion of defrauding the scheme by £3.4 million. Indicating that the Coronavirus Job Retention Scheme (CJRS) forms only part of their alleged activities, the 35-year-old man and 36-year-old woman were also arrested in relation to a suspected “multi-million-pound” tax scam. Some £6 million held in bank accounts controlled by the duo was frozen.

Waligora continued “With the new fraud task force in place by HMRC focusing on combatting fraud within the various COVID-19 financial packages we are likely to see the number of lower value fraud cases with this remit rise substantially over the next few years. HMRC has stated publicly they have already opened over 10,000 criminal investigations.”

According to the figures, the number of procurement frauds heard in courts in the first half of 2021 was up 400% from just three cases heard in the first half of 2020 (with a value of £2.6 million) to 15 cases heard in the first half of this year with a value of £9.5 million.

The figures also revealed embezzlement fraud had increased (15 cases worth £8 million in 2020 vs 26 cases worth £15.9 million in 2021), including the case of a company secretary who was jailed for five years for stealing £1.7 million from her employer to fund a horse buying habit that she described as “more addictive than drugs”. Her employer only discovered the theft when it began receiving debt collection letters following the sale of the company.

Roy Waligora concluded “As organisations now look to the future with hybrid working, business leaders will need to ensure more robust internal controls are in place, including the degree of oversight they have on key areas of their business, such as finance or procurement.”

“The relationship between employers and employees will see trust take a more central role, supported by strong risk controls. The recent government BEIS consultation* and UK SOx legislation places potential sanctions on directors and/or auditors in relation to preventing and detecting fraud. Now is the time to think about fraud risk management frameworks and whether these can withstand heightened focus and scrutiny.”