Public sector hardest hit

Fraud by managers and employees on the rise

Ken MillikenFraud by Scottish managers and employees, particularly in the public sector, is on the rise, according to new data.

Although the total number and value of cases fell last year, the number of fraud cases involving staff against their own companies or public authorities almost doubled.

KPMG’s Fraud Barometer, which measures fraud cases with losses of £100,000 or more reaching UK courts, reveals the amount lost to high value fraud in Scotland fell by 46% from £8.6m in 2014 to £4.7m in 2015.

The number of fraud cases also fell slightly from 13 to 12 (8%).

But the number of cases committed by employees and management against their own employers, increased by 83% from six in 2014 to 11 last year. The Scottish public sector was particularly hard hit – losing £2m in 2015 compared to less than £700,000 in 2014.

Fraud committed by customers against businesses in Scotland dropped from five cases in 2014 to zero in 2015. 

Ken Milliken (pictured), head of forensic for KPMG in Scotland, said: “The insider threat remains, with fraud by management and employees on the rise.

“We report on the high value cases which have come to court.  We know from our work with organisations across all industries that there are many more instances of insider fraud and embezzlement.

“This is not just a Scottish problem, with the public sector across the UK also suffering. Having strong fraud policies is not enough.  More needs to be done by all organisations to truly understand the risks of fraud and to address those specific risks.  The threat may not be where you expect it to be.”

The cases recorded in Scotland in 2015 include:

·         A senior NHS worker from Ayrshire jailed for stealing surgical equipment worth £1.3m over many years.

·         Two council bosses jailed for abusing their position and taking bribes from contractors over the course of five years.

·         A Glasgow book-keeper convicted of stealing £220,000 from a client, claiming he had won the lottery to explain his sudden wealth. 

Fraud in the UK reached more than £732m in 2015 against £717m in 2014.  The average value of fraud per case also increased to £2.4m in 2015 compared to £2m in 2014.  A key driver for this rise was two cases which accounted for £253m of the total fraud recorded in 2015.

Criminals continued to prey on the most vulnerable in society.  KPMG’s research revealed a rise in fraudsters targeting those in financial distress, offering a false safety net to dupe victims into surrendering both money and assets.

Businesses and public organisations were also targeted, with fraudsters falsifying their financial position to extract funds or entice funding investment, leading to losses of £176m, a tenfold increase on 2014.

KPMG’s Fraud Barometer saw a marked increase in fraudsters targeting individuals and families, particularly those in financial distress, stealing £156m.  This reflects a 300% increase on 2014 when just £38.5m was lost by vulnerable victims.  

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