Peter Jackson column

Feb 2 2006 By Peter Jackson, The Journal

Reported fraud has reached a 10-year high, according to accountants KPMG.

The accountancy firm's annual Fraud Barometer reports that last year 222 cases involving a total of £942m came to court, up from 172 cases worth a mere £392m in 2004.

It may be some consolation - until one remembers one is a taxpayer - that the Government was the biggest victim, but financial firms also lost 10 times more to fraud than in 2004.

I've always taken an interest in fraud, since my first proper job after university was as an auditor.

This could be dull. I recall one American client saying to me in disbelieving wonder as he studied me working: "Hell man, if there's one thing worse'n countin' a pile o' beans, it's countin' a pile o' beans someone-else has already counted."

But it did have its moments, particularly at one manufacturer in Cambridgeshire, when a sales ledger clerk - military moustache, tweed jacket and Daily Telegraph rolled under his arm - was exposed of having creamed thousands from the works social club.

He had been doing it for several years but, as was usually the case with company fraud, he was never going to get away with it.

Sooner or later somebody checked and found the money was missing. Most fraud, in my experience, was amateurish, desperate and doomed to failure, usually little more sophisticated than the hand in the till, and sound financial controls meant it was usually detected sooner rather than later.

But this is changing and, like everything-else in the business world, it is changing because of the internet.

The web gives fraudsters access to a vastly bigger targets, it allows them more easily to operate from outside a target organisation and it allows them to defraud while still remaining a continent away.

Furthermore, the private individual, who is unlikely to have any financial controls, is particularly vulnerable, whether it be to an e-mail scam, identity theft, or penetration of his internet financial details.

In this regard the Financial Services Authority has issued a timely warning to banks that they must do more to help consumers deal with online banking fraud, saying that half of active internet users are "extremely" or "very" concerned about potential fraud when making an online transaction.

Let's hope the banks take heed. It would only take a few high-profile cases to shatter confidence in our increasingly important e-economy.