With National Fraud Authority estimates suggesting that fraud costs the UK economy £30 billion each year, Hitesh Patel – KPMG’s UK head of forensics – predicts that 2015 will be a year in which the number and assortment of scams will go up, in turn suggesting that mobile payments and changes to pension planning will be the root cause.
“From the fraudsters’ perspective,” explained Patel, “2015 is likely to be a profitable year. Online transactions are only going to increase as mobile payments become more widespread. An increase in the volume of faceless transactions reduces the checks and balances that organisations have come to rely on, meaning that fraudsters will find it easier to get away with falsifying details and diverting cash to their own accounts, stealing identities and selling goods or services that are sub-standard at best or, at worst, don’t exist.”
Patel continued: “With pension changes putting more cash in peoples’ hands, their readiness to invest or spend will be akin to attracting moths to a flame. It means the confidence tricksters will redouble their efforts to convince people that the prospect of a high return on investment is more of a reality than a promise.”
2015 is also widely expected to be the year that interest rates rise. Combine this with other increases in the cost of living and, according to Patel, the result will be stress on personal circumstances that becomes too much to bear for some people.
“Unfortunately, rather than look for help, evidence exists to suggest that these individuals will turn towards dishonest means in order to make ends meet. We’re also likely to see more in the way of employee and management fraud and a rise in ‘get rich quick’ schemes.”
Combating ‘The Threat From Within’
As the festive season moves into full swing, KPMG’s Priya Giuliani is warning that ‘The Threat From Within’ is the ghost of Christmas present. Giuliani argues that, with many businesses in a relaxed mood, employees intent on committing fraud will try to take advantage of opportunities where the usual ‘safety checks’ are relaxed, and either attempt to remove stock or simply get away with misappropriating assets.
A partner in KPMG’s Forensic Risk Consulting practice, Giuliani commented: “Money can be tight at this time of year with higher than usual spending leading to additional pressures on employees. Combine this with a juncture when targets and bonuses are assessed and it’s easy to see how employees can be tempted to falsify sales or overstate performance so that they look like they’re hitting targets.”
Giuliani added: “For many businesses, the lead-up to Christmas also represents a boost in demand. Most turn towards temporary staff for support, but in the rush to improve customer service they may not adequately vet those new recruits. With many regular staff taking time off, the resulting lack of supervision also provides a rise in opportunities for the fraudster.”
Giuliani pinpoints a marked rise in ‘payment diversion fraud’ where fake requests are made to change supplier’s bank details so that funds are diverted into the fraudster’s own bank account.
“Our analysis shows that cases range in value from just over £30,000 lost by one business in a single transaction to a total of £5 million extracted from another. In almost all the cases we’ve seen, fraudsters appear to be making use of openly declared business relationships.”
In conclusion, Giuliani told Risk UK: “It’s particularly worrying that fraudsters often rationalise their behaviour. They may believe that they’re only ‘borrowing’ the money from their employer to tide them over an expensive Christmas, but the fact is that their actions can have serious repercussions on an organisation’s financial stability. It’s something that cannot be ignored because, if it is, any business falling victim to fraud is more likely to be a ghost to Christmas future.”