The volume of fraud cases heard in the Welsh courts has more than doubled in the first half of 2021 with the alleged value of fraud rising by 39% to £2.2 million compared to the same period last year.

Professional criminals continue to be the main class of perpetrator and were involved in four of the alleged fraud cases. As observed in 2020, government organisations and the general public were the most common victims of fraudsters, suffering from frauds totalling £716k and £581k, respectively.

However, in contrast to 2020, where the perpetrators for all fraud cases were men, four of the eight fraud cases heard in the period to 30 June 2021 involved women. Two of these cases involved employees who allegedly committed fraud against their employers.

Damian Byrne, Forensic lead for KPMG in Wales, commented:

“The decrease in fraud cases heard in the Welsh courts during 2020 was notably lower than historically observed due, at least in part, to the disruption caused by the COVID-19 pandemic. The increase in fraud cases during the six months to 30 June 2021 was therefore somewhat expected and may continue as there has been increase in opportunities and incentives, during the pandemic for example, through changes to working arrangements and temporary and permanent business closures, leading to a level of heightened fraud risk.

Our research shows that government organisations, individuals and businesses continue to be of particular risk of fraud from professional criminals as well as, in some cases, their own employees. As the economy recovers we anticipate fraud risk will remain high so it is important that organisations and members of the public remain vigilant to prevent falling victim to fraudsters.”

Case studies to reach the region’s courts during the last six months include:

A Finance Director who, through what the judge described as a “sophisticated and well concealed fraud”, stole £826k from her employer over a three-year period. It is understood the individual abused her position and accounting experience, she was a Chartered Accountant, to obtain money which she then used to fund her gambling addiction, family holidays and a BMW car.

A company director has been accused and found guilty of money laundering after £193k was stolen through an email phishing scam. The email targeted a separate company which enabled fraudsters to request invoices to be paid to a bank account held by the director. Prosecutors have been unable to identify the fraudsters but noted that the individual “was clearly involved in an arrangement to launder funds from that fraud”.

An individual who stole £200k from a pensioner after claiming the funds would be used for property development and the purchase of horses but instead the fraudster pocketed the funds.

The National Story

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 continued recovery in the system following COVID-19 lockdowns.

Figures from KPMG UK’s Fraud Barometer released today 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.”

Professional criminals seize on COVID-19 disruption as general public fall victim to fraudsters

The extraordinary conditions created by the pandemic saw professional criminals take full advantage of the general public according to the figures. Cases which 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 was 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 observed:

“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.”

Fraudulent abuse of COVID-19 financial packages exposes the government to fraud

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 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.

Roy Waligora commented:

“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.”

Working from home sees rise in procurement and embezzlement fraud

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.”