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Fraudsters given Brexit boost as EU vote creates ‘perfect ecosystem’ for fraud

News: KPMG’s Fraud Barometer highlights the internal and external threats facing businesses - particularly SMEs.

By Ellie Burns

Fraud has been given a Brexit boost, with KPMG revealing that the UK’s EU referendum vote has created ‘the perfect ecosystem’ for fraud.

According to KPMG’s Fraud Barometer, the value of prosecuted fraud fell to £328 million in the first half of 2016, down from £385 million over the same period in 2015. Although this is good news, the auditing firm warned that Brexit had created uncertainty and economic volatility, fuelling an environment where crime can flourish and where fraudsters can ‘exploit people’s vulnerabilities and confusion about the future.’

The report found that commercial businesses were swindled out of £95m in the first half of the year, with SMEs particularly vulnerable.

Internal threats were found to be a sizable risk, although the two biggest fraud cases detailed in the report came from external threats. The first of these cases concerned a charlatan posing as a billionaire banker to the Pope to help a gang swindle a shipping firm out of £73m. The 49 year old duped them into handing over the funds by claiming he could get them a 1,200% return using a secretive Papal trading platform, but instead spent their millions living the high life.

The second case involved an advertising scam which saw thousands of small businesses across the country tricked into paying for adverts in a magazine that never materialised. It was estimated that up to 15,000 victims fell prey to the sales team, who falsely claimed to be representing the police, fire or ambulance services to create trust and respectability.

Hitesh N Patel, UK Forensic Partner at KPMG said: “While economic conditions remain soft, it is unsurprising that commercial enterprises and investors are looking for new ways of making money, often dealing with people they have not encountered before. For commercial businesses, two of the biggest frauds recorded this year progressed so far because the fraudsters were able to create a reputational illusion, convincing victim companies to hand over large amounts of money – often sums that materially impacted their ability to operate. As the environment for business continues to be tight and competitive, fraudsters are able to hide easily among genuine businesses.”

The Fraud Barometer also looked into UK regions, with London and the South East seeing a 585% rise in the value of prosecuted fraud against commercial businesses in the region. Talking about the increased threat from within, coupled with external threats, Chris Wheeler, Forensic Director for KPMG in the London Region, said: "An organised criminal’s view of a target business is no different to the manner in which a sales manager views a likely prospect; know your customer, be patient and develop a strategy.

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"Whilst businesses can counter these measures to a degree through robust internal controls and employee screening, they must still remain guarded to the “cyber-chancer”. Such chancers attack businesses using spoofed emails, to them success is simply a numbers game. Cast a wide enough net and someone will get caught.”

John Lord, managing director at identity data intelligence firm GBG, believes that businesses need to be more transparent with data in order to stop the fraudsters in their tracks and better their chances of winning the fight against fraud. He said:

 “In the fight against fraud, businesses not only need to remain alert but also need to realise how effective data transparency can be as a way of battling fraud. When data is shared freely between the public and private sectors, across geographical and political boundaries and amongst international bodies, a more accurate picture of global fraud patterns can be established. If everything is secret, how can anything be checked or corroborated?

"By being able to use accurate data to connect the dots, predict algorithms and identify behaviour patterns, we can start to build up an intelligent view of fraud, on a global scale. In order to trade more, especially in these uncertain times, businesses need to trust more, and this trust can only be built with a global view of fraud instances.”

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