I have always liked the various regional fraud forums (or should it be fora?). They provide a great networking event for me as a forensic accountant specialising in fraud to attend. Since meeting with Northumbria Police ‘s Phil Butler prior to the inaugural North East Fraud Forum event – must be as far back as 2003 – I have been attending these events – including the North West Fraud Forum and the London Fraud Forum. I spoke at the very first one and have given talks at them subsequently. There are other fora around the country, but you can only attend so many networking events!

In my own area, Yorkshire and Humber, I had been attempting to get a local fraud forum galvanised for some time. I remember working with a leading fraud lawyer from DLA Piper to interest some of our public sector colleagues to spark off a similar regional forum. This was back in 2004/2005. My lawyer friend was tasked with getting the Leeds City Council interested and I was to do the same with the local West Yorkshire Police force. Unfortunately neither of us had much success – perhaps we were not very good at lobbying or working the “politics” of the matter. My own response from the then acting DI of the WY Fraud Office was negative – and that I should seek to attend the North East Fraud Forum for any networking I wanted to do!

Thankfully that officer has moved on now and there is indeed a Yorkshire and Humberside regional Fraud Forum in operation – set up by the sterling efforts of others I must say, though I continue to be a strong supporter. It does get a lot of support from the police forces, not just West Yorkshire but North Yorkshire, Humberside and South Yorkshire forces as well as various other leading organisations and bodies.

In fact Paul Welton of Humberside Police Economic Crime Unit called me last week and asked if I would like to speak to BBC Humberside about why I attended the forum and I said that I would be delighted to help. I was to chat to Andy Comfort on his breakfast programme on Monday morning of the 7th of June – the same day as one of the forums events “Tackling Business Fraud” (that I was attending later that day).

So this morning – eight o’clock approaches and I am sitting nervously waiting for my phone call – a list of prepared responses as to why I attended Yorkshire and Humberside Fraud Forum’s events.  Of course once the call comes all preparation goes out of the window – we chat about fraud live on radio for well over 10 minutes and how it is an increasing problem today. It certainly focuses the mind – what are the problems that fraud poses for us today and how do we tackle it? The fraud forums are only a small part of the answer, but they do go a little way to illustrate the importance of the public and private sectors working together – something that all seem to voice but few ever look practically to see how it can work.

The police will tell you that they are under-resourced when it comes to dealing with cases of fraud – it is not surprising as fraud investigations are extremely labour intensive. I understand that there are only something like 400 – 500 full time police officers working in the various fraud squads around the uk. Compare that to a typical fraud, maybe worth around £250,000 in losses to the victim – might take up the full time of at least one if not more police officers – for 6 months, a year or even longer. Then consider that the level of fraud is estimated to cost the UK some £30.2 billion per year (as estimated by the National Fraud Authority and probably a vast underestimate) and you will see why the police alone can only chip at the surface of the fraud problem.

Other agencies investigate fraud of course – we have the Serious Fraud Office – that the new government is considering combining with the Financial Services Authority and Office of Fair Trading’s fraud investigation wings – to form a more powerful Economic Crime Agency.  We have  investigators from the Department For Business Innovation and Skills and from HMRC as well as from other agencies – all investigating fraud.

But what we really do need – and this is exactly in tune with David Cameron’s fight against public sector waste of recent years – is a much closer involvement of the private sector in the fight against fraud generally. I would like to see this achieved by the utilisation of private sector investigation resources and financial fraud specialists – using transparent tendering methods based on obtaining the best quality of services at the most reasonable prices.

It is difficult to believe that we are already into month 6 of 2010. It only seems like yesterday that I returned from my holiday in New York to the minus 15 degree centigrade weather at Manchester Airport at the beginning of January! Now five months later and we have a new Conservative government (Liberally tempered of course) in power and the promise of some sense being brought to the UK. Sense that is after some massive cuts in all the areas of public spending that generally pay my bills! Time for some radical thinking or what?

Actually I do not see the pressure on public spending as a problem. As somebody who has always operated on a “value based” approach instead of the professionals’ normal “hourly based fee” I find that I still remain competitive in all areas of publicly funded fraud activities. This includes working for the fraud regulators and undertaking expert witness work funded by the Legal Services Commission.

However, it is no good being simply “competitive” these days. Promise of results should be most important. In the field of dealing with fraud matters this can be very difficult and yet I believe that one of the fraud investigators’ biggest developing markets is the smaller company or individual who has lost money to the crooks. This is the sector that seems to have the hardest time sorting out the problems caused by the fraudster. Identity theft causes disproportionate distress to the victims compared to the financial; lo0ss they suffer. They also lose credit ratings and the ability to operate in today’s digital environment. Gone are the days that we were paid in cash and bought everything we needed using the same. The loss of a few hundred pounds by a family can cause huge hardship, and thousands of such victims together will provide millions of income for the organised fraudsters.

It is important that smaller losses are investigated. There should be little attention paid to proportionality where crime is involved, but when it comes to trying to get £10,000 back from an employee theft this does not seem to be the case. The only way I have been able to help victims in such smaller cases is to write a letter for them after a brief look at the case details and one or two documents – for them to take to the police. such a letter can cause the authorities to sit up and take note – it is sort of a mini- fraud investigation report that serves to illustrate the seriousness of the loss and show that further investigation will bear fruit. By spending a little on such a letter can stimulate interest and even provide a focus for other victims to band together and fund a worthwhile asset recover action. First Stage Investigation Services are intended to be a cost effective solution to the situation where the level of loss does not merit huge sums being invested in recovery action but can serve either as a catalyst for more substantial regulatory action (and compensation) or can even promote a negotiated settlement in some cases.

2010 opens with thick snow and ice. I was lucky as my trip to New York in the first week of the New Year went without hitch. Our flights and connections seemed to match the few windows in the weather and no delays were experienced. There was one small worry when blizzards started raging in York on New Year’s day – we were due to head over the Pennines at three o’clock the next morning and had visions of the M62 being impassable. Therefore late afternoon saw us rushing to pack and set off while the snow kept falling. We stayed the night in Manchester and had a comfortable flight!

Back to my desk after the break sees a number of cases to continue with in my fraud investigation portfolio and a couple of new inquiries via the Internet, one being from a police force economic crime unit and the other from a new firm of lawyers.

It seems that this year is heading off for a basket of criminal frauds and fraudulent trading – not much changes there then! It will be interesting to see if there are any pronouncements from the Legal Services Commission about their proposed cut backs in funding experts or will we all just experience a harder job getting our quotes agreed?  Without any cohesion amongst us forensic accountanst I can forsee many simply dropping their rates just to make sure they get the work. I am sure that the LSC will use market forces and the lack of perfect information to ensure that they get away with underfunding criminal cases.

A new investigation is kicking off into yet more bad business management and phoenixing of businesses. I guess that people like to make the money but hate to pay any of it back to the suppliers or tax man!

I read with some concern an article in this Sunday’s papers about the plans of City of London Police Economic Crime Unit for the coming year. Detective Chief Superintendent Stephen Head is on record saying ‘…as with the drugs trade, there is little point picking up a lot of small fry while the big operators get off free…I want to concentrate on maybe five very big fraudsters in place of 20 smaller ones…’

I agree that the big fraudsters should be targetted a lot more than they are. The whole concept of fraud is that it is a hidden crime and many organised criminals are currently getting away with various fraud scams big time. Yes, a lot of them get caught eventually, most having run for between three and five years. An awful lot of damage is being done to our economy in that time, which can ill afford it in the current climate. There are many fraudsters that do not get caught – or worse still, the authorities are unable to act fully or effectively, such is the complexity of the scam being perpetrated.

But there is a huge raft of smaller frauds taking place. Fraud is endemic in our society of high taxes and consumer excesses. If you thought that the ‘under table’ economy was restricted to third world countries or other less advanced administrations, you were wrong. Our society is as corrupt as any other, just that we are more circumspect.

Systematic tax evasion occurs, where workers are encouraged to claim benefits and not pay tax by their employers so that the wages bill can be less. These are the sort of companies that trade for a year or two, closing down and then starting up under a new name and very likely leaving a few unpaid bills behind them. These are the businesses that steer clear of any professional help, from lawyers and accountants who have a legal obligations to shop them to the authorities that overides any professional duty of confidentiality. In this way the Anti Money Laundering Regulations are missing a large proportion of the illegitimate cash that is being circulated and tax that is being avoided.

Add to this the wide ranging stress and hardship that is caused by the smaller frauds that come to light. Old people are duped out of their savings by an unscrupulous carer, small businesses go to the wall when the bookkeeper embezzles the funds needed for next month’s wage bill and individuals risk their dwindling pension funds in an attempt to provide for their families future. The fraudster does not care about the hardship he or she is causing, and for every ‘big fraudster’ systematically skimming millions, there are a thousand con men and scam merchants earning much less but nevertheless causing immense harm to innocent people.

If the City of London is upping the size of the frauds it targets, I hope this is not the pattern around the country. Already the small fraud is too easy to commit, and the chances of the local police investigating are remote. Not only do they not have the resources to investigate, they also lack the will because their performance is measured by dealing with more ‘serious’ crime like murder, rape, burgelary and social nuisance. I agree that these are areas that need continued attention, but should rank alongside fraud when bidding for funding from central government.

Instead of attempting to budget a limited sum of money, and cutting back on fraud, attempts should be made to discover how much money would be needed to establish a comprehensive fraud resource and then worry about funding it! I know that if this resource was established, the level of asset recovery of criminal proceeds of crime would escalate substantially and not only provide self sustaining funding for economic crime units, but also contribute to compensating the victims of fraud for their losses! I just hope that there will continue to be funding for at least some work for forensic accountants - forensic accounting is the only efficient way to unpick the financial records behind some of the more complex frauds that are detected.

The first decade of this millennium has been characterised by quite a lot of substantial frauds when you pause to look back. We have seen massive accounting scandals in the form of Enron and Parmalat – who would have thought that a top tier accountancy practice could collapse as a result of such a scandal as Enron?

The decade has seen a massive raft of VAT frauds in the “Carousel” merry go round of Missing Trader Inter Community mobile phone and computer chip scams. Coming years may see this fraud extend to all forms of products, even including the trading of carbon credits!

The scale of the Ponzi investment frauds that started emerging in the latter part of the decade only reflect a business model that seems to have been flourishing for three quarters of a century since Charles Ponzifirst gave his name to such an obvious swindle. There will be more of this in the newspapers for years to come as I believe the culture of the Ponzi style fraud is ingrained in the financial systems around the world. A lot of it is sustained in the same way as the global economy is sustained – the illusion of a bottomless bucket of credit.

And throughout recent years we have seen the authorities try to get tough with the organized criminals by confiscating their assets. What has happened is that the career criminals have enough money to hide behind and the onerous asset seizure is routinely applied to those who fail to cover their tracks or are stupid enough to neglect filing even token tax returns!

So where will we be in the coming 10 years or so? I think the fraud regulators may start to form some sort of cohesive group but how far will they get? Given the public sector wastage of the past 12 years or so I suspect that the limited funding available as a result of propping up the banks will not go far.

Speaking of funding we are still awaiting effects of the public spending cutbacks on the forensic accounting profession. Will criminal fraud and money laundering trials become shallow bun fights without the financial issues being fully aired by competent accountants?

My own views are that there will be ample scope for the efficient fraud operator to assist private clients if they are efficient, hard working and not greedy for fees. A hard task perhaps? I do not think that the individual or small business who has been “ripped off” is properly catered for. Losing £10,000 or even £100,000 does not seem to excite the authorities these days, but they will spend tens of £millions on the big frauds.

By managing fraud cases on behalf of groups of individuals who have lost out to systematic sharp businesses or outright fraudsters - it may be possible to persuade those agencies with the powers available to them to get involved.

Having spend the best part of two days writing my latest newsletter, printing it, wrestling with getting a colour header (and failing), signing it and stuffing around 750 into envelopes with a covering letter, I did not feel like spending the last hour or two of today, the first day of December, doing any proper work! Actually I did have help with my mailshot so I shouldn’t grumble too much.

Writing the newsletter always makes me take stock of some of the current issues that affect us forensic accountants. This time I noticed that professional negligence of accountants and lawyers have been figuring rather a lot recently through a number of cases that I have been doing recently.

When looking at accountants’ obligations these days it is easy to see why they fall foul of the regulators’ interest from time to time. An accountant is the very veneer every organised criminal needs to assist with laundering his proceeds of crime! Criminal Proceeds and Money Laundering are of course very big now – especially since the Proceeds of Crime Act 2002. Some say it has draconian provisions – that allow an errant accountant to face up to 14 years in jail if they are found guilty of assisting in the laundering of the proceeds of crime.

This may seem harsh, a professional should have client confidentiallity surely? No, not so, the professionals must act as gatekeepers in the authorities’ fight against crime. Even a lawyer cannot claim legal priviledge if trying to conceal money laundering from the authorities.

Accountants are firmly within the regulated sector, as far as Anti Money Laundering Guidelines go. This means that they must carry out KYC – know your client – checks. Also, if they come across something untoward in their client’s records they must make a suspicious activity report (SAR). So accountancy is a regulated activity. However, much of forensic accounting is not!

If I provide expert witness services to the police, I hardly need to verify that they are the authorities that they say they are. I mean – meetings are held at the police station….! If I work for the defence, I hardly need to report the details of the fraud to the authorities who are already investigating it. In fact, the Money Laundering Regulations do say that publicly funded work is not a regulated activity.

But, if I should be asked to investigate for a private client I will most definately need to have regard to the KYC and SAR requirements like my normal accounting coleagues.

Back to work after a week off and my thoughts again turn to marketing my business. I am about to send out a newsletter in connection with my fraud expert witness work and have been musing about the current state of the investigation industry. While I am comfortably occupied with work, perhaps now is the time to develop the business and grow – when all others are pulling in their belts?

I listened with interest this morning as the newsreadergave a daily update on the worsening economic crisis in Dubai and the likelihood that there will be support on a selective basis by neighboring Emirate Abu Dhabi.

Hopefully Dubai will ride its crisis and emerge as strong and prosperous as ever. I do however think that they will probably become more aware of the risk of fraud and the effects it can have on various parts of their business and financial infrastructure as the months go past. This is because I recall a conversation I had last year with a couple of members of the board of Dubai Holdings, the Dubai Royal Family owned umbrella company controlling many £100 billions of assets not only in the Gulf but worlwide also.

I was being interviewed for potential services I could provide to them but recall being mystefied as to what was wanted from me. I did not know if they wanted me to look at a specific problem, advise them on their global fraud risks or trouble shoot one or more of their subsidiaries. I remember thinking that there would be no way forward when I was asked the question “…what will you do when you have finished investigating any fraud we might have…?”

Phew…a multi billion global conglomerate and I should entertain the idea of even finishing mapping fraud risk on my own…!

My very respected and able business minded interviewers were only falling into the trap many financiers and businessmen have encountered over recent years. Fraud is an insiduous and complex beast – it entwines itself into any organisation that fails to consider that it is a threat - in such a way that it is only when a massive loss comes to light that any notice is taken. My old supervisor at the (then) DTI used to call this a “banana skin”. She meant of course that it was when a business slipped and fell flat on its back – they don’t happen often but when they do…

Any business or entity or even economy is greatly at risk in this current poor economic climate. The pressures on idividuals, groups of people or even governments to committ fraud is stronger. Fraudulent trading is going to be rife and we are going to see a lot more high street names other than Borders giving up the ghost as the Christmas trading period does not answer all the problems. Many commentators say that we are only just beginning to enter the trough of this recession!

My advice is that it is never too late to review your business, to fix any hemoerages of cash due to fraud and to secure the future security of the bsuiness. Doing so may allow you to ride the coming storm – unless we really are seeing the “green shoots of recovery” which I doubt.

Although I have strayed off my subject of this post – being the right time to build a fraud investigation practice – my point is clear. Over coming months the level of distressed businesses finding that matters are worse than they feared due to fraud will increase – the floodgates of fraud have not opened yet and there will be much work to do.

I decided that it was high time that I spent a day working from home and getting all those little jobs done that I have been putting off when working in the office. For one thing there is the little matter of writing a newsletter, updating my contacts list and getting the publication out. Fraud investigations simply do not just appear on the desk out of thin air.

While considering what was newsworthy I decided to review my web marketing efforts for my fraud investigation work. It seems that as a budding author there are so many opportunities to write about your work that it is difficult to know where best to start. Take for instance HubPages. I have written about fraud investigation here and believe it is a good forum for articles directed back to your business marketing site.

So we are back to marketing fraud investigation services using the Internet. If I am successful in doing this I believe that the knowledge picked up will also be an invaluable tool in my cybercrime investigations. The Internet is a unbelievably massive entity, and learning how to navigate properly through it is both an art and a science. Google, Yahoo and many others are familiar faces, representing massive amounts of financial activity – not only within their own businesses but those that interact with them to build their own (including mine). The potential for new and innovative frauds is immense.

Investigating these new frauds will not be easy, it will be daunting. However, armed with the knowledge of how the Internet works, how the various marketing activities are managed and how the financial interaction is organized will allow the basic concepts of “follow the money” to be adhered to in any fraud that needs investigating!

So when it comes to developing my fraud investigation services around the UK and much further afield using the Internet to reach many more victims of fraud that simply don’t want to turn to their usual, often expensive and inexperienced accountants to deal with the problem I will be mixing my circulated newsletters and face to face meetings with my network of contacts with a large measure of on line marketing!

I recently wrote a post on my earlier blog site (which has unfortunately disappeared along with my older articles into my hosting server’s archives!) commenting on the state of the world economy as we draw towards the end of 2009 and how it will be effecting the level of frauds that are being discovered and investigated.

I concluded that we fraud investigators should be getting very busy as a result of the recession, along with insolvency practitioners and those who give advice on cost cutting and business turnaround.  Whilst there is some general activity increase particularly in London in the UK the great wave of new fraud cases has not yet broken. In fact the work load has been going up and down over recent months  but definitely not flat out or gaining momentum.

The initial worry was that my own portfolio was struggling, but this is not the case. I have been reasonably busy given one or two changes I have been making to my marketing efforts and then there is the increasing competition it seems! A number of recent tenders have been lost on price and this is one area where the recession is biting, in areas of civil investigation. Others are turning to fraud to fill in their shortfall. This is coupled with extreme pressure on public sector spending where certain agencies and regulators outsource their investigation work.

The word on the street from a number of my more frank and well known sources is that it is generally quiet.  From a couple of my insolvency sources it seems that the floodgate of businesses poised to go under is about to burst – whether this is before the end of the year or early next year we can only surmise.  This opinion is supported by a couple of contacts I have in the banking arena. They say that there is a lot of desperation building up (individually as well as for businesses) and the banks are not yet back to a position to assist fully.

Added to this are the reports from some of the economists that even if we are in or near the depths of the recession – it will be a long slow climb out. This will mean the weaker companies will go bust as the market place “cleans” itself up and that yes, frauds will be surfacing. It also means that the drivers for the fraudsters to start committing acts of fraud will be a strong as ever and this in turn means new cases will continue to reflect the present economy well into the next decade.

So my view remains the same. We will start to see a rise in fraud coming to light – as well as businesses going into some form of insolvency procedures – a rise that may well begin soon and keep on going for some time to come!