The value of fraud cases heard in the Welsh courts in 2021 reached almost £7.9m, nearly double the value of £4.1m in 2020, according to KPMG UK’s latest Fraud Barometer.

This substantial increase is largely attributable to a general rise in the value of cases heard in the region’s courts: in 2021 the three highest value cases had a combined value of £5.5m, whereas in 2020 the three highest value cases totalled £2.5m. There was also a 60 per cent increase in the number of alleged fraud cases heard in the region’s courts, from ten in 2020 to 16 in 2021.

As observed in 2020, professional criminals were, by number of cases and value, the main group of perpetrators in 2021, allegedly committing seven cases of fraud worth £4.4m. There was also a marked increase in the number of alleged frauds committed by individuals in management roles, from one case with an alleged value of £500k in 2020 to four cases in 2021 totalling £2.7m.

The Fraud Barometer data shows that government organisations were, by number of cases and value, the main victims of alleged fraud in 2021, suffering an estimated £5.3m in losses across six cases. This is an increase in both the number and value of cases compared to 2020 when government organisations were the victim in three cases totalling £970k.

Commenting on the figures, Damian Byrne, Forensic Lead at KPMG in Wales said:

“The increase in the number and value of alleged fraud cases heard in the Welsh courts in 2021 compared to 2020 reflects the high fraud risk that is faced by organisations, individuals and businesses. However, it is important to remember that the number and value of alleged fraud cases in 2020 was notably lower than expected due, at least in part, to the significant disruption to the region’s courts caused by the COVID-19 pandemic.

“Despite the efforts of those working within the legal system there has been an increase in the backlog of unheard cases since the start of the pandemic and it may take a number of years for this to be cleared. Therefore, we may see high numbers of fraud cases being heard in the region’s courts into 2022 and beyond.”

 Cases to reach the region’s courts over the six months include:

• A Welsh businessman who stole nearly £1.9m of public money has been jailed for more than five years after committing VAT fraud. The individual is understood to have submitted fraudulent VAT returns to HM Revenue and Customs (‘HMRC’) to reclaim VAT on machinery that was never purchased. The funds were used to purchase four properties, including three in Spain. He was caught after HMRC officers noticed that the profits reported in his company’s accounts did not match the information in the falsified VAT returns.
• Two men have been convicted of running an illegal £2.6m waste racket involving the burial of toxic rubbish next to a Grade II-listed mansion, which was used as an illegal dumping ground before being subsequently sold by one of men. The pair attempted to hide their secret activity by using large excavators to bury the waste, but police were tipped off by people in the local area who noticed the large machinery.
• A business manager of a family firm from which he stole almost £200k has been found guilty of “systematically, deliberately and cynically” defrauding his employer. The individual is understood to have abused his position as a trusted member of staff by ordering domestic heating boilers from a supplier, which he sold on privately after they were delivered to his home and used his knowledge of the company’s systems to conceal his activities.

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The number of alleged fraud cases heard in UK courts in 2021 went up by 66 per cent compared to the same time in 2020. Despite another lengthy COVID-19 lockdown at the start of 2021, UK courts appear to have got back on their feet and made headway with the backlog of cases that built up because of initial COVID-19 measures.

Figures from KPMG UK’s Fraud Barometer released today, found 298 alleged fraud cases were heard during 2021 (up from 180 in 2020). Yet the opposite trend was seen in terms of fraud value: the Fraud Barometer figures, which records alleged fraud cases with a value of £100k and above, saw the total value of fraud reaching UK courts in 2021 fall significantly from £724m in 2020 to £444.7m in 2021.

Whilst cases in UK courts provide an indicator of fraud activity, these cases are small in the context of fraud crime reported to Action Fraud. Between 2020 and 2021 there were 875,622 reports made to Action Fraud with a reported loss value of £2.35bn, pointing out the stark reality that relatively few cases are brought to court.

When analysing the data in more detail, it appears that there weren’t any high value fraud cases over £50m last year, rather it was the lower value crimes that increased in both value and prevalence. Fraud cases worth between £100k and £5m rose from 164 in 2020 with a value of £100.3m, to a total of 285 in 2021 to the value of £178m.

Perpetrators of fraud continued to take advantage of the general public – in 2021, 93 cases of fraud were committed against a member of the public, to the total value of just under £116m, compared with 39 in 2020 totalling £33.3m.

Commenting on the findings, Roy Waligora, Partner and Head of UK Investigations at KPMG, said:

“With the introduction of the BEIS White Paper and heightened focus on fraud, I would hope that it has helped tackle the prevalence of high-value fraud. With increased controls, it is only logical that less of these crimes slip through the net. In 2020, there was a £200m film piracy case which accounted for 28 per cent of the fraud value reported, hence why there has been such a significant fall in fraud values. With new regulation and heightened awareness of fraud, I hope cases as catastrophic as that one will no longer be seen in the future.

“Another reason for the fall in value could be that more complex cases are still being delayed as a result of the pandemic or are still currently being heard in court, and we will closely monitor for this in next year’s data.”

Digital related fraud is on the up, and UK courts are cracking down

 When the pandemic hit, everyone’s lives were forced online, and the same was true for the criminal population. According to figures from The National Fraud Intelligence Bureau, 80 per cent of reported fraud is cyber enabled. The Fraud Barometer data revealed that fraud relating to cyberattacks or the trading of stolen data rose significantly from one case worth £9.2m in 2020 to five cases worth £22.6m last year.

Further, the data exposed a significant increase in the number of cases heard in UK courts pertaining to account takeover or payment transfer fraud. The volume of this type of fraud increased by 288 per cent, from eight cases in 2020 to 31 cases in 2021. The value of this type of fraud also grew from £8.3m in 2020 to £46.8m in 2021, a significant rise of 462 per cent. According to the Fraud Barometer data, account takeover or payment transfer fraud was the second most common type of fraud, second only to embezzlement, which had 51 cases heard in UK courts in 2021 (compared with 42 last year).

Reflecting on the data, Roy Waligora, Partner and Head of UK Investigations at KPMG, said:

“Criminals immediately exploited the new ways of working and living that were created because of the pandemic, causing a huge spike in online fraud. Sadly, many fraudsters have, and continue to take advantage of the unusual situation we find ourselves in, yet it is promising to see that some of these criminals have been brought to justice. While organisations and the public have been implementing more robust safety checks and preventative measures to curb this type of crime, I expect to see more cases of this variety included in the Fraud Barometer in the future.”

Government will struggle to bring COVID-19 fraudsters to justice 

 Meanwhile, the increase of cases heard in court relating to government fraud continued to rise from 38 cases to a total value of £129.4m in 2020, to 72 cases with a total value of £215.3m in 2021. However, there were still very few COVID-19 related fraud cases reported in the Fraud Barometer data. This could be due to several factors such as court delays and case backlogs, or that the value of cases typically doesn’t go above the £100k threshold that the Fraud Barometer covers. That said, the National Audit Office (NAO) recently announced that government failed to put adequate measures in place to prevent fraudsters stealing billions of pounds through its Bounce Back Loan scheme, so it may be that these cases will simply never reach the UK courts. Managing economic crime in a holistic and joined up way has proven difficult and has become an urgent priority for government as it deploys funding for resources to investigate fraud.

Some positive news in this regard was the successful prosecution of two international criminals (who were already on bail for money laundering offences) who fraudulently claimed £10m in Bounce Back Loans. They were jailed for a total of 33 years. They claimed up to £50k a time, making over £10m in total, with £3.2m coming from a single UK bank. They used various shell companies to commit their crimes.

Roy Waligora added:

“Almost overnight government organisations had to find a way to support individuals who could no longer work because of the pandemic restrictions, so it’s inevitable that some fraud would happen and go undetected. The Fraud Taskforce put in place by HMRC earlier this year is already sifting through thousands of cases to identify these criminals, so we will hopefully see an uptick in cases reaching the UK courts going forward, though many could go unprosecuted.”

The healthcare sector continues to be a key target

The UK healthcare sector has continued to be ravaged by fraud, not only from external criminals, but from individuals working within the sector. The NHS Counter Fraud Authority estimates that the NHS is vulnerable to £1.14 billion worth of fraud each year, a bill inevitably picked up by the taxpayer.

In this year’s Fraud Barometer, there are several cases where hospitals and hospital trusts were the victim of either employee or management fraud. For example, one fraudster boss was found guilty of embezzling £200k over a three-year period from his GP surgery during the pandemic. Secondly, a gang, including one member who was an NHS employee, has been accused of stealing more than £322k from Worcestershire Acute Hospitals NHS Trust. There was even an accountant who defrauded several companies, including three NHS organisations he secretly worked for at the same time, out of £1.4m to fund his lavish lifestyle.

Roy Waligora said:

“The healthcare sector is at the centre of the COVID-19 crisis, be it with providing timely medical supplies, including personal protective equipment (PPE) or helping in the recovery of COVID-19 patients. The NHS had to rapidly adapt to the crisis while facing financial, technological and operational challenges. But it was this change that opened them up to increased fraud risk. “Given how much the NHS loses to fraud every year, investment in preventative measures will be well worth the initial financial outlay.”

Insider threats hit a mounting number of organisations

 Cases of fraud relating to insider threats became more prevalent in UK courts last year with a substantial rise in fraud committed by employees (66 cases in 2021 compared with 44 in 2020) and management (66 cases in 2021 compared with 21 in 2020). The most notable case was a male employee aged 25 who set up multiple fraudulent bank accounts on behalf of an organised crime group, which were then used to transfer the proceeds of a £30m scam against customers.

This trend is potentially linked to weaknesses in internal controls driven by the impact of COVID-19, as businesses grappled with new ways of remote working.

Roy Waligora observed:

“COVID-19 has changed so many aspects of our working lives. As organisations have had to make changes to adapt to economic uncertainty and hybrid working, many employees may feel a mixture of reluctance and anxiety about being forced to perform their job in a certain way to comply with new measures. Economic uncertainty has been a great motivation for some employees to commit fraud. Those working from home may even think that they have a lower chance of being caught because they are out of sight of their employer and are willing to risk it.”