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More cases reported

Fraud on rise as greed fuels breach of trust

FraudFraud in Scotland rocketed by 80.9% last year as more individuals were tempted to use company resources to fund a lavish lifestyle.

Reported cases amounted to £18.2 million taken fraudulently, against  £10m in 2014, according to the BDO FraudTrack report.

The figure was slightly skewed by the highest value reported fraud of £6m in Dundee, a money laundering scam which involved replacing legitimate cash intended for bank transfers overseas with so-called “dirty” money.

The second highest value reported fraud of £4m involved a Glasgow convenience store operator who was charged with fraudulently evading VAT by failing to declare earnings. Police found £900,000 in cash at his home and premises.

By far the largest number of frauds in Scotland involved theft and cash which accounted for 42% of all frauds during 2015.

This is the most common form of fraud and among the simplest since it usually entails a trusted employee exploiting their position to transfer funds or goods to accounts operated by them.

In one example from 2015 an NHS worker stole £1.3m worth of medical equipment which he then sold for personal gain. Another involved an assistant in an accountancy firm who handled charity clients who transferred £726,000 from trusts established to help charities to other accounts which she benefited from.

Sat Plaha, head of regional forensic services at BDO, commented: “Clearly fraud remains a major issue for Scottish business. Theft and cash fraud is by far the most common method of defrauding a business. This is because many businesses simply do not have sufficient checks and balances within their operation to ensure that trusted employees cannot exploit loopholes.

“The problem is that individuals will always be placed in positions of trust it just depends whether they decide to use that position for their own gain.”

The reasons for fraudulent behaviour are almost always greed and to fund a lavish lifestyle. These reasons accounted for 67.80% of all frauds followed by gambling, which made up 14.58% of fraud and then debt accounting for 8.14%.

Sat Plaha said: “Fraud is almost always about greed. People don’t defraud others because of any particular need but simply because they identify an opportunity and then take advantage of their situation for their own gain.

“They may then develop expensive lifestyles which need to be continually funded often resulting in the fraud becoming more audacious. Without proper controls many companies may well suffer fraud for many years without noticing.

“It is essential for companies, charities and businesses to put in place systems to monitor financial transactions so that fraudsters cannot continue for years without detection.”

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