I am aware that the rates that I charge are usually pretty competitive, especially for publicly funded work such as expert accountancy carried out in criminal defence matters.  It was with some shock that I was approached for a tender and warned that the new rates would limit my hourly rates to £144!

I quickly searched the Legal Service Commission’s web site and found their paper “Legal Aid Reform – Expert Rates” – to be implemented by 3 October 2011.  Sure enough, the rates did include the hourly rate of £144 for a “Partner” expert accountant working out of London.  Of course this was the top rate, and as most expert witnesses will use other resources in their firm, the resulting “composite” or average hourly rate can be somewhat lower.

In order to be competitive I charge my highest rate for input into any assignment that I consider to require my full skills as an expert, or “Partner” input.  I also charge a lower rate for work that involves routine accountancy work – I call it my forensic investigation rate.  At the end of the day, it is the composite rate that interests me as I am sure it does the LSC.  However, there is no guidance on the LSC site for this sort of rate which will depend on the nature and complexity of the work – and I imagine that a sole practitioner will need to temper his or her urge to simply quote at the highest partner rate if they wish to remain competitive.

The rates in the framework fall well below big high street accountancy firm rates and even (boutique) niche firms such as my own may sometimes struggle with them.  My worry is that the rates will be more attractive to the “have a go” accountant found in the smaller or more regional firms and that in some cases quality will suffer in the competitive market.

I note that the LSC caveat their new framework with the possibility of increasing the hourly rates:

• where the complexity of the material is such that an expert with a high level of seniority is required; or
• the material is of such a specialised and unusual nature that only very few experts are available to provide necessary evidence.

Unfortunately this may have the effect of allowing the largest firms to consume the available resources for a few high value and high profile cases leaving little in the pot for the mainstream work – which actually in each case is just as important and very likely as relatively complex to the respective parties as the big cases – watch out for another London Underground maybe?

One thing I know is that although the paper indicates prior authority is not mandatory – I will always insist on funding being in place before I start work, unless I am prepared to accept that the work is being done for nothing and payment will be a bonus!

It is some time since my last post, I would like to think that is because I have been so busy that I have not had time for niceties such as marketing and updating my fraud blog. The truth is that I have been busy, but looking at my bank balance you would think otherwise! My heart felt thanks to those clients that pay my bills on time but there are less than warm feelings for the Legal Services Commission who insist that I help the UK’s austerity measures by loaning my income to them for periods best measured in large proportions of a year instead of months.

I am due to circulate my contacts in the autumn with news of my fraud business developments, at which time I will inform everyone of my new business address details. Having used a Royal Mail Post Office Box for two years I gave up recently in disgust – mail was taking two weeks to arrive and some items went missing, including one cheque! Therefore I have taken the following offices and can receive all mail here (however any sent to my home address will of course still get to me safely):

MARK JENNER & CO

POPESHEAD COURT OFFICES

PETER LANE

YORK

YO1 8SU

UK

Usually during the Summer months when work quietens down a little, I pause and take stock of my business strategy. Things have not been quiet during the traditional holiday period which is good – but I have still taken some time to think and have decided to target my traditional areas of expertise much more – corporate fraud investigation and asset recovery. I suppose the fact is that I have not really been targeting anything at the moment, just keeping in touch with my contacts and finding that fortunately the work assignments have been flowing in regularly – often through my Mark Jenner & Co web site

Corporate investigation is an area that I enjoy and gives most satisfaction in terms of feeling that you are actually assisting with a problem. I am currently investigating a number of phoenix trading companies that have not been acting “in the public interest” (which is about as much as I can say at this stage) and a case of the mysterious disappearance of a client’s £400,000 investment through a dodgy broker – who is now being indicted for this loss and several others.

One of the opportunities I see is for my type of business to assist in larger corporate frauds, fraud investigations and asset tracing exercises. Money and investment is tight all around, and an operation to deal with a large financial loss must be funded in a more balanced way. Unfortunately once the initial shock of massive losses is over, perhaps the company has gone bust as a result, the principals often lose interest – passing the affair over to city recovery firms and solicitor practices. I would propose managing a significant part of the matter utilising resources already available to the victims.  Undoubtedly the large professional firms firms do an excellent job, but there are some occasions when the recovered assets are simply funding their existence.

I would like to see better managed recovery operations, with more input by the victims and perhaps more occasions when contingency fees are charged by the larger firms. Easily recovered money (such as restrained bank balances etc) should be ring-fenced with only basic costs taken by professional firms from the “pot”. Any profits, normally classed as “premium rates” should be taken from speculative asset recovery work. This is how I have worked in the past, though in practice very few accountants and investigators will work this way.

However, there may be another way. Creditors (i.e. people who are owed money) can take control of the operation to recover their losses. They must act swiftly to ensure that their actions are effective and do not allow the dust to settle on the matter – as can happen when the assignment is taken on by a large business recovery firm of professionals. I can remember being handed cases almost two years after an insolvency and it was a race against time to bring action using the Insolvency Act. There is a lot I can do early on which could lead to recoveries or provide intellegence to the authorities – and allow the creditors to be more in control over the recovery efforts, hopefully leading to larger dividends and a better outcome.

Time I think is the crooks biggest ally. Insolvency practitioners, accountants and lawyers can act quickly when they want, but once a case is on board “due process” tends to mean that investigation activities can grind on slowly. Time builds layers of defence over a crook’s actions, and makes it hard for the professionals to bring a case.  If the law enforcement authorities get involved, this can insert another time period into the process and civil asset recovery becomes very difficult.

Every case is different, and I hold my hat off to one or two insolvency firms (you know who you are) who do a grand proactive job of recovering assets, albeit at a cost. I do think that it should be mandatory for recovery success to take place before anything more than modest fees are paid.

Fraud takes many forms. Always there is some form of deception involved. With vehicle clocking, unscrupulous car dealers will sell cars with car mileage that seems to be much lower than it really is. It is not an offence to change the figures shown by an odometer, however it is an offence to sell a vehicle which has been changed in this way without telling the customer. It used to be very easy for anybody to manually change an old fashioned dial within the speedometer, now these are digital and a bit more knowledge is required. However, there are many companies advertising on the Internet who will perform this service for you. Many will warn you of the consequences of failing to inform the next buyer of your car, some will not!

I was recently involved in a case involving the prosecution of somebody for the offence of clocking a handful of cars over a period of about two years.  Old vehicles with reasonable bodywork and interiors but with very high mileage were purchased cheaply and sold on for a healthy profit once their odometer had been “wound back” to a more respectable distance.

The person was convicted and served several months in jail, eventually being released on licence. Then, as the offences were several in number, were committed over a period of time and involved transactions greater than £5,000 in total, the Crown pursued a confiscation order under the Proceeds of Crime Act 2002.  This resulted in the loss of the family home, a couple of investment properties and other assets that were owned.

Is this a little harsh for someone who has perhaps made £10,000 extra profit by selling a dozen or so cars with mileage that has been reduced a bit?  Prison… then to lose everything you have, plus the possibility of a further default sentence if you are unable to pay the amount of confiscation benefit ordered by the Court?

Well you might think so until you consider a few facts. Approximately 1 car in every 40 is reckoned to be “clocked” – some 700,000 vehicles in the UK. This figure may be on the low side since many vehicles clocked before they are 3 years old (before the requirement for an MOT) will never be discovered. In the case of very high mileage cars, these can be very dangerous especially if only the minimum service needed for the annual MOT is carried out.

The offender in the case above had lived his life “off grid” as far as the authorities were concerned. This meant that he never declared his income for tax purposes and his lifestyle and bank accounts showed substantial earnings and wealth.  As he kept no business records, the clocking of the dozen or so cars were only the tip of potential criminal activity that at least included large scale tax evasion. A couple of decades of high living at the expense of the rest of us tax payers probably merits a much harsher sentence than was received?

The incidence of fraud goes far beyond the large Ponzi schemes and credit card identity frauds that are widely reported in the press. Many aspects of our daily life bring us into contact with fraud and sharp business practice. We are always being targeted to buy things we do not want, with the methods being used sometimes very illegal.

For example, I have a domain name www.mark-jenner.com that I use for my business of providing forensic accounting services. The domain must be renewed annually for about £10. This I do regularly through the reputable company that also provides my hosting services. Every now and again I receive a communication just like the one I received this week in the form of a very reputable looking email invoice reminding me of the imminent expiry of my current annual domain registration – the invoice for $75 for one year was shown as “Net 15″ indicating that I was supposed to pay it in 15 days!

I have no doubt that if I had clicked through the “Secure Online Payment” link that I would have at the very best paid money that I did not need to pay. At worst I might provide payment details to crooks who would take even more.

The annoying thing is that looking closely at the email – there is the “get out” clause:

“…your registration includes search engine submission for MARK-JENNER.COM for 1 year. You are under no obligation to pay the amount stated above unless you accept this offer by Apr 13, 2011. This notice is not an invoice. It is a courtesy reminder to register MARK-JENNER.COM for search engine listing so that customers can locate you on the web…”

So in fact this company is only offering me the service of submitting my domain to search engines! Yet it uses the fact that my domain registration is expiring to do this. The two are not connected in any way – but if I was a busy administrator in my business with the authority to pay such small bills, I might just have done so automatically. As I own my business, and have responsibility for promoting my own web site (including submission to search engines etc) I was not impressed by this solicitation. Domain re-registration due dates plus ownership details (including address, which serves to make the “invoice” look more authoritative) are freely available from the domain registrars and such solicitations can be sent out in bulk automatically by email. There are bound to be some who take up the offer and I am at a loss to know what value for money they might receive – if nothing illegal has really been done.

When carrying out invetsigations into companies, the Department for Innovation and Skills are often at a loss deciding what legislation has been contravened. In these cases it is often enough to say that an organisation has “not been operating in the public intererst” so that the High Court can order the company to be closed down.

It has been an interesting week that has just passed by.  I have finally succumbed to the iPhone age and acquired the latest version that will keep me connected to the Internet and my emails as well as work and friends – not sure if this is all a good thing but at least I know where the “off” button is!

Post Office Horizon Accounting System

On Monday I was asked by the BBC Inside Out program to give my views on a current issue that appears to have been raging on and off over the past few years – a criticism by postmasters that the Post Office accounting system is flawed! Apparently there are reports where Postmasters say they are finding black holes in their accounts and being forced to pay large sums of money back to the Post Office.

I understand that there has been a long running battle between postmasters, who are essentially franchise holders of a Post Office branch, and the Post Office. When a postmaster buys a Post Office as a business to run, he will invest money in the bricks and mortar (or rent) the premises and ancillary business such as newsagency, confectionery, grocery etc. The Post Office business is a separate business activity and is kept distinct from any other sales that might be going on. An agreement is signed with the Post Office that includes a clause whereby the postmaster is responsible for all the funds and must account for any losses that occur.

The business is recorded on the Horizon accounting system which is networked within all the branches as well as the head offices of the Post Office. The Post Office business within a branch is reconciled daily to ensure that the amount of business it records on the Horizon system agrees with the amount of money, stamps, postal orders etc that are locked away in the safe each night. Any errors are investigated immediately and overs/under reported to the Post Office. This is typical practice for any bank.

The allegations are that the Horizon accounting system is flawed and throwing out errors that the postmaster has to make up. I do not know if this is the case – it would need a team of forensic computer systems analysts to check the system. My involvement was in two cases in around 2004-2006 where postmasters were being accused of each stealing about £50,000 each.

That this amount of money was missing was undeniable. That the missing money had accrued over a period of a year or so was evident. That the defendants had personal money problems or gambling habits were facts…I could go on. The point is that if an error arises, the postmaster must report it to the Post Office, not simply ignore it! If the errors keep on coming, sticking your head in the sand won’t help. If you let the errors rise to £50,000 and know you have signed an agreement agreeing to make good any losses – then there is little to mitigate your position!

Loft Insulation Scam?

I do not know if this is a scam – if not it demonstrates my fraud investigator’s suspicious mind! I have now received several calls from an Indian call centre offering me a government grant to insulate my loft. Normally I politely say that I am not interested, but this week I let the caller speak for a while. I was asked seemingly innocuous questions about the length of ownership of my home and the thickness of the insulation already in place. Then I was told that I was eligible for a government grant to renew the insulation. I would be telephoned by a local agent and he would arrange to inspect my loft and provide the papers for making my application. I was asked for a piece of memorable information as a password so that I would know the agent was bone fide! This is where my antennae really started twitching – recalling the support publishing scams that I had investigated in the past for the DTI where exactly the same modus was used. I declined, but the caller didn’t seem to mind.

Finally the caller asked me to visit “their” web site at http://actonco2.direct.gov.uk. I did this and could find no information about a current grant scheme.

Now this might all be above board. In this financially austere climate there might be public funds available for insulating lofts that are already insulated. I would question why a public organisation in the UK would use an Indian call centre though. I have passed the information to my contacts at Companies Investigation Branch within the Department for Innovation and Skills (DTI). If I am able to get to the bottom of this one way or the other I will post the details on my blog.

It appears that June was my last posting on this blog and much water has flowed under the bridge since then. Holidays have come and gone and a couple of major trials settled.  However, the most important event has been the setting up of my own specialist forensic accounting service in October. Those close to me will know that this is something that I have wanted to do for a long long time.  The thought of working for yourself can be very daunting, and the security of employment within a big firm can be difficult to give up.  however, there are some very good reasons for believing that fraud specialists such as myself can provide a much better service working as a dedicated niche provider.

The main reason is because as a small firm specialising in fraud, white collar crime, money laundering etc it is possible to provide a more focused and professional service within this very specialised field.  The trick is to get the balance right. Often in an accountancy firm an expert forensic accountant is encouraged to undertake much more work than he or she can handle alone or with just the help of administrative staff.  They must delegate sometimes high level professional work to junior staff in order to achieve the financial gearing typical of the business model within such a firm.  This is not to say that the work is not of a very high standard, but together with the city centre overheads involved it can mean that assignments can be very expensive.

Currently and for the foreseeable future the world is experiencing an economic downturn.  In the UK some strong measures are being implemented to counter this including substantial reductions in public spending.  In the arena of fraud regulation, funding has always been tight, now even more so.  If there were not enough funds previously to deal with fraud how will we cope over the coming few years?

For example, before the 2010 general election the Legal Services Commission planned to cut its expenditure on expert witnesses used within criminal defence cases by 20%.  Now this reduction could be even more.  Already undertaking essential forensic accounting work on behalf of the defence team was becoming unprofitable within any leading forensic accounting team within the market place and rates were under continual pressure all the time.  For example, my own rates that I was able to achieve if I had any hope of winning work through competitive tenders had reduced by 40% over a 10 year period (let alone the need for any inflationary rise!).  The Legal Services Commission had always said that they expected the work to be carried out by retired accountants and one man bands in future years at rates half of what they had been paying.  Of course this situation is unacceptable and threatens access to justice for many – however for me it means that I am able to work at the reduced rates comfortably without city centre overheads and only undertaking work that I have extensive specialised experience of doing.

The same funding problem goes for police and other fraud regulators.  In the past I have been unable to service police clients who have required the services of a forensic accountant – as they ought to be doing more often.  Using an independant forensic accountant within financial crimes that are being investigated can add substantial strength to any fraud prosecution or asset confiscation under the Proceeds of Crime 2002 case and avoid the opportunity for unreasonable or unopposed attack by a defence expert (potentially such as myself!).  However, the police fraud squads and economic crime units are always strapped for funding and the current cutbacks will not help.  Again my niche services can provide them with the high quality and properly accredited forensic accounting service that they need at acceptable rates.

Finally there are the victims of crime.  I have extensive experience of investigating fraud. When working within the major accounting firms my assignments ranged from medium sized cases to very large ones.  Increasingly I was aware that small and medium losses to fraud (say £10,000 to £500,000 or even more) could not easily be dealt with at a cost proportionate to the losses. Very often the victims would be individuals or smaller companies who could not afford the further costs of investigating their losses.  The trouble is that investigating fraud can be a time consuming job, and employing a fraud investigator with an open ended cost can mean costs mount up alarmingly.  The very large losses experienced by the major corporations, banks and insurance companies will continue to use the very high quality services of the top forensic accountants within the top tier firms – but it is possible to investigate smaller frauds economically using independent experts who can also collate the efforts of the victims and their staff, monitor the effectiveness of any legal advice needed and generally provide a solution to fraud problems at acceptable prices.

Mark Jenner & Co recognises that there is a need to provide very high quality of service to a manageable number of clients – I enjoy being part of any team that enlists my services and strive to add value by recognising where value can be added. Helping with stragtegy can also assist with keeping costs down especially if involvement is early on in any matter.  I always say that employing a a forensic accountant who is also an expert in fraud at the start of any case for a few hours or even a day or so in a large case, can save substantial costs down the line. I always make an initial review of any case on a no obligation basis in any case and I can indicate where and when expert accounting or fraud investigation input might be needed, what results might be achieved and how much the cost/benefits will be.

Please visit my business web site for Mark Jenner & Co for a number of articles written about various different aspects of fraud.

When you consider purchasing a house with the help of a mortgage, you must first find out how much home loan amount you can afford to repay on time. How much of an expensive house you can purchase depends on the amount you can get. So, before searching for your dream house, ask yourself -“how much house can I afford?”. After you find a house you can afford, shop around to find a mortgage at a favorable interest rate. While shopping around, don’t forget to check the service background of the lenders. There are various fraudulent lenders who scam borrowers in different ways. So, it is necessary to find a reliable lender.

How can fraudulent lenders scam you? Fraudulent mortgage lenders can scam you in various ways. The most common scams are: • Inflated appraisal: Lenders get your home appraised to determine the size of the mortgage they will offer you. Fraudulent lenders inflate the appraised value and offer you a larger loan amount. Larger mortgage will require you to make high monthly payments and this is how these lenders defraud you to make high profit. • Not disclose fees upfront: To obtain a home loan, you have to pay a number of fees, starting from origination fee to underwriting fee. Scammers do not disclose all these types of costs upfront and later charge you with hefty fees. How can you prevent getting scammed? Some of the tips to help you prevent yourself from falling into traps of fraudulent lenders are: • Verify the value of property: Gather information about the prices of similar kind of houses in the neighborhood. You can also consider taking help of an independent appraiser to verify the value of your property. • Ask for good faith estimate: Ask you lender to provide you with the good faith estimate of all the costs that you have to bear in order to obtain the home loan. • Read documents before signing: You must read and understand each and every document before signing them. You should also ask your lender to provide you with copies of all documents that you sign. Apart from lenders, you can also be defrauded by mortgage brokers. So, when you’re considering obtaining service of a broker, check its reputation. You can ask your friends and relatives for referrals. In this way, you can easily find a reliable mortgage professional and obtain a home loan that will suit your needs and affordability the best.

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.

One of the most common questions asked of employment lawyers is how to safely sack an employee or director who is suspected of being on the take.  It is a question that often cascades down to forensic accountants who are asked to provide financial evidence for the frauds or assist with tracing and recovering the money.  Often, such fraud specialists will be asked to assist with the disciplinary process and also with providing a pivot for the subsequent civil or criminal action.

One thing that generally becomes obvious when asked to help out is that an organisation seems to be very indignant that a trusted member of the business could turn out to be a thief.  However, nearly always the problem has been created by the business itself, usually because no heed has been taken whatsoever to the risk of fraud.

There is a commonly recounted saying that only 10% of the population are criminally minded, but that only a similar amount of 10% are truly law abiding.  The rest of the population 80% are usually good unless motive and opportunity are put in their way.

Motive and opportunity – the most significant drivers of fraud – far more important than having a criminal mindset in the first place.  To see how this works – take a pretty common situation where a financial director uses his director’s current account (correctly) to record any personal spending.  At the end of the financial year he raises a bonus large enough after tax to clear the current account.

This is a pretty common occurrence and many business owners do the same. But what if the finance director is the person who is trusted with all the accounting function and the other directors, often not so financially astute, leave the money side to him?  If the bonus is not authorised then this is effectively theft.

The finance director may argue that he has posted similar bonuses to the other directors’ accounts – and shows them their accounts in credit. But this is a paper accounting figure and the business may not be able to afford to pay the sums owing to the other directors – yet the finance directo has had the benefit of the expenditure throughout the year.

If the company policy does not have controls to prevent the above, it is possible that the finance director will escape sanction and it will be hard to dismiss him.  It is important where one person is given overall control of a finacial function that there are some controls in place to make the person answerable. For instance, there will be limits to spending (cheque writing, credit card payments, bank mandates etc) without second or even third director approval. There will be a regular publication of directors’ current accounts and any payments or bonuses over and above contractually agreed amount must have general (and minuted) board approval.

In my work as a forensic accountant I see too many instances where a couple of business owners or directors suddenly realise that a fellow director has overstepped the trust they have been given. They want his blood but in fact in many cases they have simply given him too much opportunity and when motive arises – and being short of money can arise very easily for all manner of reasons – it is only human nature for the vast majority of people to succumb to the temptation!

Identity theft is a subject that is raised and discussed at many fraud forums and similarly reported in an increasing number of news articles. It is not just the cloning of identities followed by fraudulently obtaining goods or services on credit cards that results from identity thefts. Some very complex frauds are built on false identities and credibility stolen from others.

A report in this week’s Financial Mail in the Mail on Sunday illustrates how such fraud might be working. It involves a potential boiler room fraud which involves the selling of bogus or worthless shares in business ventures by high pressure salesmen. Credibility to their product is provided by details of another real and likely more successful venture whose details can be checked in the public domain.

In this case it appears that an oil company is touting for investment in its two “proven” oilfields. Its web site gives details of a director that are the same as those of another company Petroneft Resources who also has oil fields in Lineyoye and Tungolskye, names that are curiously similar to those quoted for the other bogus oil company. The bogus oil company cannot be contacted and its address details given are false. Petroneft, which is based in Ireland and is clearly a bone fide company, was astounded to find that there is another company that appears to be advertising the same assets as it owns.

Petroneft has reported this instance of credibility hijacking to the Irish Financial Regulator, Financial Services Authority and City of London Police. The FSA say that incidents of identity theft and associated unauthorised sale of investments in typical “boiler room frauds” has increased dramatically over recent months. In the last three months alone it has received 29 such reports.

It does seem that even with the current economic climate that there is plenty of money that investors are seeking to find homes for. This may be a case of moving funds around in an increasingly competitive market or there being more money available for investment. Whatever the case, people with money and those responsible for others’ are still investing in bogus schemes at an alarming rates. Ponzi frauds and other advance fee scams are still being reported and the current flavour it seems is the boiler room threat.

Financially astute persons (i.e. those with money or investing it for others) should not be easily caught by these scams. There is a level of fraud prevention due diliegence that can be carried out that does not involve much effort but will uncover, or at least throw up some red flags, most of the bogus investment opportunities. It is no good relying on company searches in a climate where identities are so easily hijacked. Drilling down into an individual’s or organisation’s identity is essential, to uncover all of the public information available and checking or cross referencing this wherever possible. When investing several £100,000 or millions, surely it is worth checking to see if a director is who he says he is and lives at his stated registered address? For a few pounds this, and many other details, can be so easily verified.

Mark Jenner is a forensic accountant specialising in fraud investigation and fraud prevention.