For there to be a meaningful fight against fraud there needs to be a legal system capable of dealing with the cases brought by the prosecution authorities. There is no point beefing up the police fraud squads and giving them resources (which should include adequate funding for forensic accountants) to investigate fraudulent activity if the cases are going to falter at court.

Why would they do that? If a criminal trial is not managed properly and proportionately it will either fail completely leading to a re-trial or an appeal. This happens a lot and is the biggest reason why costs of dealing with criminals in general are so high.

The Legal Services Commission comes under fire a lot – not just from this blog site! The Daily Mail yesterday (2nd February 2009) reported the gross waste of public funds by the LSC. Audits have revealed that they have paid some £25 million too much to criminal defence lawyers over the year. If a public auditor is able to uncover £25 million wasted out of a budget of £2 billion per anum then just think how much a proper fraud investigator would find!

This may sound a bit of a sweeping statement, and is based purely on anecdotal evidence. But do not forget that as a forensic accountant I not only get paid for a lot of my work by the Legal Services Commission but also deal very closely with firms of solicitors and barristers that do also. Yes I do see some barristers getting paid £1 million each year from public funds, but I also struggle myself to receive ordinary market rates for my own work.

Sometimes I must argue my case with an LSC case worker that is questioning a quotation that I have submitted. Having done these sorts of jobs for over 15 years I usually have a good idea of how long they will take and what resources I will need to apply. It is not always easy to translate these ideas into a recipe for my costs and sometimes have to argue whether or not each of 10,000 documents will require 20 or 25 seconds to review! I know that I will need a week and a half or so but putting it into simple science is not always so easy.

Apparently since the 1980s spending by the LSC has multiplied 7 fold. Its not surprising – forget the published inflation figures – in 1983 we bought a house for a price that we would easily have to pay 12 times more for now. That aside, the past decade or so has seen the labour government increase the amount of legislation in place many times. The Proceeds of Crime Act 2002 is only one example of many new laws that were introduced, were lengthy and ill conceived. They have led to substantially more work needed to be done by the Defence solicitors and barristers to prevent miscarriage of justice. I have assisted in some of this and know how much time can be wasted by the Crown.

I would rather be putting the fraudsters away any day, but am happy to present a truly interdependent stance within my Fraud Advisory Services work portfolio and act as expert accounting witness for the defense in white collar crime cases. Because the Crown tends not to prepare financial cases in a safe fashion, often by not utilizing forensic accountants, there is much scope for checking and representing the case by the defense. My work in this area is not intended to get the dguilty off, but ensure that their case is presented at an accurate level of severity so that the courts can award a just sentence. If the LSC continue to be criticized for waste and their budgets cut accordingly, who will be doing the essential fraud defence work to balance the system?

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.

Welcome to my new look fraud blog site.  After much gnashing of teeth and wailing etc I managed to upload the blogging software manually to my web host and what a relief – now hopefully concentrate on writing about fraud matters.

The Yorkshire and Humber Fraud Forum annual conference went smoothly yesterday held at the South Yorkshire Constabulary Leisure centre (Niagara Sports and Social Club).  Some of the talks were very good and some were a little tedious.  The split seemed to be public sector/private sector!  A lot of forensic accountants were in attendance but very little serious networking was done as there were very few potential work providers!  These fora are very good events generally and have served to raise the profile of anti-fraud efforts throughout the UK.  I attend events at this Yorksire forum and also at the North East Fraud Forum and the North West Fraud Forum.  I have also attended a couple of annual events at the London Fraud Forum.

Now that the blog site is back up and running the next step will be to tinker with my service line web site – a web site for fraud solutions throughout the UK and further afield.

The biggest concern at the moment is the competition for work.  Many forensic accountants who are general practitioners are looking to the fraud work as competition for all other work increases it seems.  This means that we fraud specialists must lower our prices to keep a stream of work flowing.  I have just been low-balled on a job I quoted half as much as I would have done a year ago.  A bit of lateral thinking is required I fear.

A lot to do!

Regards, Mark