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Mortgage fraud quadruples in 2010
09 August 2010
Mortgage fraud has nearly quadrupled in value during the first six months of 2010 and is over half of all fraud committed in the UK, reports KPMG. Fraudsters committed 21 cases at a cost of £96m compared to the same period in 2009, where there were 18 cases worth just £24m. One of the biggest mortgage cases was worth £50m, involving two solicitors charged with commercial mortgage fraud in relation to obtaining a money transfer by deception and dishonesty. Meanwhile, an estate agent was jailed for six years after attempting to pull off a £2m mortgage fraud after stealing the identities of two homeowners. "The fact that increasing amounts of mortgage fraud are being prosecuted is cold comfort for the financial services industry," says Hitesh Patel, partner, KPMG Forensic. "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." He says this is a legacy issue for the banks from the pre-recession boom years when inflated house prices offered the opportunity for fraud. "Banks will be hoping they have uncovered most of their fraudulent loans but the trend remains upwards and it could be some time before we see the peak," says Patel. Overall, the KPMG 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. On average, manager fraud was far more serious than employee fraud, with theft totaling £135m compared to £45m, or over £4m per case compared to £1m per employee case. For example, one Birmingham finance boss manipulated the profits of a steel supply firm to ensure a bonus by falsifying the company's accounting records. He spent over £100,000 at a local lap dancing club, and by doing so 11 redundancies had to be made at the firm, which was nearly bought to its knees as a result of his actions, said KPMG. Professional criminals perpetrated the most fraud during the period with 56 cases reported at a value of £391m, over half the total amount included in the Barometer. Government was targeted in 38 cases worth £178m and a number of these were tax scams involving benefits, VAT, or carousel fraud. Regionally, London and the South East remain the biggest hotspot for fraudsters - the region accounts for over half of the total cases (88), which equates to a staggering 81% (£493m) by value. The North East is its nearest rival, with 26 cases reported at a value of £43m. Published by IFAonline
