Fraud booms in East Anglia & Yorkshire push UK bill to £2 billion

East Anglia has seen an 802% increase in reported fraud over the past year, while Yorkshire experienced a similar wave of expensive scams, pushing the national fraud toll to £2 billion for the first time in 5 years, BDO has found.

The total value of reported fraud in 2016 hit a five-year high, increasing 31.5% to £2.0 billion, according to new analysis by professional services firm BDO. The alarming spike comes in spite of the number of reported cases falling slightly from 519 in 2015 to 504 in the most recent data available, as the average value of fraud cases rose 35.4% to a five-year high of £3.9 million, according to BDO’s FraudTrack division, whose sample traditionally excludes cases of less than £50,000 in the UK.

Regional hotspots

In the 2015 figures, London accounted for the highest portion of fraud in the UK at £599.8 million, but while the UK’s financial hub is understandably still one of the top victims, the cost of fraud in the London and South East region has decreased to £381.4 million in the latest results. The biggest case in London involved a £79.5 million Ponzi scheme, in which three men claimed their electrical wholesale business had won a contract to supply electricals to the London Olympic Village, in order to persuade victims to invest hundreds of thousands of pounds into the fictional project. Mirroring London, the West Midlands remain another of the biggest hotspots for fraud in the UK, in spite of a 16.6% decrease in such crimes.

Bucking this trend though, while contributing significantly to the national increase in fraud costs, Yorkshire and East Anglia both boomed. Yorkshire, strikingly, rose 388.1% to £1.02 billion, of which a huge proportion was contributed to by a single £1 billion VAT, which researchers attributed to a woman from the city of York. While this singular occurrence might be something of an anomaly, suggesting that the costs of such activity will most likely stabilise and decrease in the region next year however, East Anglia saw an 802% rise in the cost of fraud, which was spread over a 186% increase in the number of cases to 20 in the locale in 2016. While the cost of £15.1 million is significantly smaller than the other key regions then, the boom is a clear cause for concern, particularly with the region playing home to high proportions of citizens most susceptible to con artists.

In 2016 there were 153 reported cases of fraud targeting individuals, which accounting 30.4% of all reported cases are the most common of this brand of crime. While the number of these cases only fell by 1, the total value of these cases shrank by over £100 million, falling to £172.3m from £276.7 million in 2015, the first value fall in this kind of fraud since 2012. An analysis of these frauds shows that the majority of cases continue to target the elderly and vulnerable, with striking examples highlighted by BDO’s report including a £9 million fraud perpetrated by four businessman who conned victims into signing up for satellite TV warranties they did not need, or bullying them into mis-sold deals with nuisance calls, and a £3 million scam operated by five fraudsters which saw pensioners and young families buying homes on land in Warwickshire that could never be developed.

Kaley Crossthwaite, Head of Fraud at BDO and author of the report, said, “Looking beyond the anomaly of the £1 billion VAT fraud, the good news is that the value of fraud has fallen in many key areas and sectors. Unfortunately, volumes continue to remain high at over 500 cases a year suggesting that, while people are picking up on frauds before they spiral too far out of control, there is still plenty of fraud out there."

Sector peaks and troughs

Public administration was the industry sector with the highest level of reported fraud, accounting for £1.4 billion of the UK total, an increase of 204.7% from the £450.9 million reported in 2015, due in large part to the previously mentioned £1 billion VAT case in York. Beyond this anomaly though, the volume of fraud in public administration also rose, climbing from 114 cases in 2015 to 150 cases in 2016.

With the public and regulatory spotlight continuing to scrutinise financial services ever more closely, both the volume and value of reported fraud in the sector fell during 2016.

The value of reported fraud in financial services fell more than 62.1%, from £567.2 million in 2015 to £214.9 million in 2016. The volume of reported fraud also fell, dropping from 70 cases in 2015 to 58 cases in 2016.

Within the sector, money laundering showed the biggest decrease in the value of fraud, falling from £201.6 million in 2015 to £98.9 million in 2016. The volume of cases, however, rose from 15 last year to 20 cases this year. A key case involved a man arrested by City of London police on suspicion of money laundering. The arrest was made following the investigation of a UK bank account thought to be linked to an organised crime ring. Police discovered £30 million worth of banker’s drafts during a raid on a home in the Welsh valleys in what is thought to be the biggest money seizure by UK law enforcement. 

Types of Fraud

Mortgage fraud and third party fraud also showed a significant year on year decline both in terms of value and volume. Mortgage fraud fell from 13 cases costing £151.1 million in 2015 to £54.8 million in 2016 for 4 cases, while third party fraud fell from £209.7 million in 2015 with 26 cases to £47.6 million in 2016, and just 17 cases.

While warning that the comprehensive figures still don’t paint a full picture, as many high profile victims of fraud prefer to handle matters privately without involving courts to evade public scrutiny on their own end, Kaley Crossthwaite further commented on her findings, “It is extremely encouraging to see that the public and regulatory scrutiny within financial services is starting to gain some traction in reducing the volume and value of reported fraud. In particular, we have seen a marked decrease in the level of insurance fraud as firms in the sector adopt ever more stringent systems and controls to address fraud.

“Fraud in public administration shows a significant spike due in large part to a £1 billion single VAT ‘carousel’ tax scam, however stripping this out the sector still shows a sharp increase in the volume of reported fraud, most of which involves various types of tax fraud.