SCOTLAND could be losing as much as £1 billion a year to fraud - but only a fraction of that is being detected and pursued through the courts.
According to KPMG's annual fraud barometer, published today, 18m worth of fraud was reported and resulted in convictions in Scotland last year.
That's a significant drop on 2004 when the sum hit a record 28.5m, but Ken Milliken, KPMG's head of forensics in Scotland, says it only represents "the tip of the iceberg" of what is an increasingly complex and sophisticated problem.
Milliken noted that last year was still the third highest level in Scotland since research began, with 15 fraud cases reaching court in 2005. Since 1995, when 3.87m worth was recorded, there has been a 370 per cent increase.
"We can take little comfort from the fact that the value of fraud happens to be lower this year. The reality is that in the last five years Scotland has seen a boom in fraud."
If there is any grain of comfort to be had, it's that Scotland has suffered less than the rest of the UK.
According to KPMG's figures, in the past six months there has been an explosion of fraud prosecutions across the UK, many of them high value. While there were 88 cases worth 249m in the first six months of 2005, this shot up to 134 cases worth 693m in the second half, making a total of more than 942m of fraud in 2005 - up nearly three times from the previous year, and the highest recorded level since 1995.
The largest fraud case in Scotland last year involved three men from Glasgow, who appeared in court in connection with a money-laundering operation involving almost 5m. This was dwarfed by the UK's largest fraud case, involving fraudulently acquired loans by metals trading company RBG Resources, worth 260m alone.
"Whilst our research tracking major fraud cases in UK courts shows that fraud is a major issue for both the public and private sector, the true cost of fraud is in reality far higher," Milliken said.
Last year the government, announcing a wide review of fraud laws, said it costs the UK economy at least 14 billion every year - equivalent to 230 for every person in the UK - and KPMG suggests 1bn of that could be accounted for in Scotland.
"Organisations are making continual improvements in the fight against fraud, but as advances in technology allow fraudsters to commit more sophisticated crimes, that effort has to continue if we are to begin to make inroads into an issue which causes harm to both the economy and wider society," Milliken said.
The government remains the biggest single victim of fraud (UK-wide 447m), largely through tax evasion and VAT and benefits fraud, while fraud against financial institutions - card fraud, identity fraud, false cheques - has spiralled from 37m in 2004 to 360m in 2005.
A little under half of fraud was carried out by professional gangs, but most was the result of "insider" fraud by management or employees (468m). One example included a clerk on less than 20,000 a year who funded a lavish lifestyle by siphoning 140,000 from her employers over four years by adding digits on to the value of cheques to top up petty cash.
Milliken said criminal gangs appear to be increasingly active, with organised, aggressive stings often aimed at large financial institutions, while at the other end of the spectrum individuals are committing internal fraud against their employers, often to fund extravagant lifestyles or to pay off burgeoning debts. "With both the number and the average value of frauds increasing, companies and individuals need to be more vigilant than ever," Milliken said.
The year has also been notable for the number of VAT "carousel" fraud prosecutions, involving low cost, highly portable items such as mobile phones and tobacco. Two of the biggest UK cases, both involving mobile phones, were worth 58m and 40m respectively. Money-laundering cases have also been prominent, especially drugs money.
Identity fraud continues to be rife, as fraudsters seek ways around measures such as chip and PIN. "Phishing" scams on the internet are a common way of obtaining people's identities and bank details. In one scam nearly 200,000 was stolen from 160 people who were fooled by a bogus eBay auction site.
Do you really know 'him' in accounts?
ACCORDING to research, the profile of the fraudster is becoming clearer. He is usually male, with a lifestyle not matching his income, from management or senior management, and most likely (42 per cent) he's working quietly away in the finance department, rarely taking a holiday, fearing that someone covering for him might discover the deception.
But the profile varies. Last year's largest Scottish case involved three Glasgow men "cleaning" almost 5 million of drugs money. Cases against financial institutions include instances of employees feeding information or sending funds to outside accomplices - two such cases in the past sixth months were between them worth nearly 1m.
The issue of "sleeper" employees placed or groomed by criminal gangs has been flagged in recent months by the Financial Services Authority.
In one internet scam, a man pretending to be an official internet registrar "sold" businesses and individuals fake internet domain names and addresses to the tune of 1.5m.
Other ID frauds have been more bizarre, such as the former horseshoe-fitter who posed as a pioneering biochemist with a new process for making soap, who successfully swindled businesses and local authorities out of 60,000 in grants and loans.
Individual fraud is often motivated by addiction, commonly alcoholism or gambling habits. But some are motivated by more peculiar obsessions, such as the town hall cashier who stole more than 550,000 in car parking fees over nearly a decade to fund her Elvis Presley obsession.
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