BUSINESS FRAUD is booming in Scotland, a new survey has established, with cases involving over £100,000 up by 70% last year and companies ill-prepared to defend themselves.

Across the UK there have been twice as many cases as the previous year, as so-called “carousel” frauds involving complex cross- border purchases of high-tech equipment controlled by criminal syndicates took off, at a total cost to commerce of £374 million.

North of the border, however, despite the increase in the number of cases, the value of those big cases that found their way to the High Court fell from an all-time high in 2002 of £21 million to £7 million last year.

The head of KPMG Forensic in Scotland—an arm of the accountancy firm that employs ex-policemen, forensic accountants and other financial experts to investigate corporate scams—said Scottish companies were being attacked internally and externally.

Robin Crawford said the attacks on Scottish companies were because of the lack of or inadequate fraud risk strategies, whistle-blowing policies or internal processes to combat the problem.

He said management fraud cost four times as much as that perpetrated by employees. Not only was this an unnecessary cost to the business, but the Financial Services Authority was taking a closer look at how firms were managing their exposure to fraud and dishonesty.

He said the key message for business was not to be complacent about fraud. Organised criminals were targeting companies.

“Internal controls must be robust to prevent management, employees, customers or suppliers from exploiting weakness in systems.

“Fraud can seriously damage not only the financial basis of a business but also its reputation.”

Explaining “carousel” frauds, KPMG said that in its simplest form a fraudster imported goods from a zero-rate VAT source, sold them with VAT added and then disappeared without paying the VAT to Customs.