With the KPMG fraud barometer indicating that fraud is running at a 22 year high and that mortgage fraud has nearly quadrupled in value during the first six months of 2010 conveyancers may wish to reassess the risk management processes that they use to avoid being embroiled in fraud.
Conveyancers will be aware that where they operate on a file where someone else commits a fraud the consequences can be at the least time consuming but at worst cause questions as to the conveyancers own behaviour whether that be negligent or party in some way to the fraud.
Hitesh Patel Partner, KPMG Forensic commented:
"Companies who took fraud risk management seriously before the downturn should now be emerging stronger because of it. The discipline that they have subjected their businesses to should help them gain a competitive advantage while their competitors get distracted in their reactive combat against fraud and misconduct as the economy recovers.”
According to KPMG’s Fraud Barometer 21 cases with a value of £96 million were reported in the first six months of 2010 – compared to the same period during 2009, where there were 18 cases worth just £24 million. Indeed, the whole of 2009 saw a total of only £77 million.
Mortgage fraud accounted for over half of all fraud committed against the financial sector in this period. One of the biggest cases was worth £50 million, involving two solicitors who were charged with commercial mortgage fraud in relation to obtaining a money transfer by deception and dishonesty, while an estate agent was jailed for six years after attempting to pull off a £2 million mortgage fraud after stealing the identities of two homeowners.
Hitesh Patel, Partner, KPMG Forensic commented on the figures:
"The fact that increasing amounts of mortgage fraud are being prosecuted is cold comfort for the financial services industry. Clearly, more of it is coming to light and more will follow. It is highly probable that the issue is far bigger than our figures demonstrate.
"This is a legacy issue for the banks from the pre-recession boom years when house prices inflated, providing the opportunity for fraud. Banks will be hoping that they have uncovered most of their fraudulent loans. But the trend remains upwards and it could be some time before we see the peak.”
Overall, the Fraud Barometer, which considers serious cases of fraud with charges in excess of £100,000 in the UK courts, found 166 cases of serious fraud in the first half of this year – the highest number of cases in a six month period in the Barometer’s 22 year history.
The cases had a total value of £608.5 million – down 4.3 per cent for the same six month period in 2009 (£636.5 million). However, the 2009 figures were inflated by one case worth £200 million on its own, whereas in this period the biggest case was worth £66 million, meaning that without this outlier the average value per case has risen.
Professional criminals perpetrated the most fraud during the period – 56 cases were reported at a value of £391 million, over half the total amount included in the Barometer. Often, professional criminals are targeting investors. 21 such cases totalling £185 million were recorded in the first six months of 2010. Financial institutions were also widely targeted in 48 cases worth £172 million.
Finally, the Fraud Barometer demonstrates the importance of ensuring that companies have mechanisms to prevent fraud and detect misconduct effectively. Hitesh Patel concludes:
"Companies who took fraud risk management seriously before the downturn should now be emerging stronger because of it. The discipline that they have subjected their businesses to should help them gain a competitive advantage while their competitors get distracted in their reactive combat against fraud and misconduct as the economy recovers.”
From our experience at Today’s Conveyancer many firms still fail to take adequate measures to protect themselves and their clients from criminal activity of others.
