Mortgage fraud soars

Mortgage fraud now accounts for 20% of all known, reported cases of financial fraud in the UK.

According to a bi-annual study conducted by accountancy giant BDO, fraud hit a record £1bn in the first six months of this year, with mortgage fraud alone notching up £6m – an increase on the £5m figure reported for the previous six months.

Apart from mortgage fraud, the two other main types of financial crimes are under-reporting of revenue and VAT avoidance, BDO reports.

About 16% of all reported fraud came from management falsifying the accounts of their own companies.

Simon Bevan, head of the fraud services unit at BDO, said fraud prevailed regardless of the economic climate and could not be blamed on the downturn.

However, he pointed out that austerity brings greater scrutiny and a higher number of laid-off employees prepared to blow the whistle on illegal practices.

Another growing trend identified by BDO is where managers of companies commit fraud by either setting up "companies within companies" or diverting lucrative contracts away to accomplices.

"Linked to this unethical activity is an increase in insider dealing where management don't directly defraud their own employer but their actions leave them open to stringent, and often public, enforcement action by financial regulators," Mr Bevan said.

About 49% of all fraud occurs in finance or insurance, according to the figures. The BDO data, published every six months, may understate the scale of the problem, because only cases that have been publicly reported to authorities are included.