‘Truth or Trap’ campaign nets almost £800,00 for fraud victim

Staffordshire Police’s Truth or Trap campaign has led to the successful recovery of almost £800,000 using confiscation proceedings against two men who were jailed for fraud in 2023.

In the original case, the owner of an appliance company began to notice how the delivery notes and invoices supplied by its packaging supplier did not match the level of stock in their warehouse.

After conducting an audit, they discovered that the business had also been paying too much for its packaging supplies.

It was eventually revealed that the owner of the packaging company was in cahoots with an employee at the recipient’s business.

The employee inflated invoices, created excessive purchase orders and signed false receipts to generate profit for himself and the packaging company owner.

Following their arrest, Staffordshire Police launched a detailed investigation, which found the two men had benefitted by just over £1 million.

When taken to court, both men admitted fraud by false representation and were jailed for 40 and 42 months in April 2023.

Further analysis under the Proceeds of Crime Act 2004 found that the owner of the packaging supply firm had benefitted by around £750,000, while the appliance firm employee had gained £160,000.

This led to a proceeds of crime confiscation order being issued for both offenders’ assets in August this year and the appliance company was awarded £796,110.14.

Commenting on the case, James Hardy, Forensic Director at Milsted Langdon and member of NIFA, said that according to the Annual Fraud Indicator Report in 2023, procurement fraud in the UK is estimated to total £134 billion, or 4.6 per cent of the £2.9 trillion of procurement expenditure in the non-financial private sector in the UK.

He adds, “The procurement of goods and services often accounts for a significant slice of an organisation’s expenditure and is open to a wide range of potential risks of fraud. This could be because there are usually multiple individuals involved in a process who often do not work closely together, in other words, the person who wants something purchased does not always work directly with the people who initiate orders and with those responsible for paying.”

“There are often multiple opportunities for fraud in procurement to occur and suppliers colluding with staff to inflate invoices is one of the most common types of procurement fraud.

“In this case, confiscation was successful, but this is a rarity among all instances of fraud. Clearly prevention is better than cure. Forensic accountants can help ensure that preventative measures are put in place to reduce the considerable risk of fraud that organisations face, such as that faced by the appliance company in this case.

Some of the most important measures that an organisation should take are:

• “Tone at the top” – strong corporate governance and management should ensure that effective policies are in place, that employees are probably trained and that the code of conduct is enforced. The board and audit committees should be comprised of experienced and honest members.
• A robust and anonymous whistleblowing policy is of paramount importance.  According to an Association of Certified Fraud Examiners (AFCE) report in 2024, 43 per cent of frauds are detected by tips, and that is 3 times more than the next most common method of detection.
• The AFCE report also found that of the 18 different anti-fraud control categories, surprise audits and proactive data analysis were the two most effective methods of reducing the loss from fraud. However, interestingly they were both in the bottom four for most common anti-fraud controls in place in organisations. This represents a clear opportunity for firms and forensic accountants can help perform some of that proactive data analysis.

“Sadly, prevention is not always successful, and a cure needs to be administered.  Forensic accountants are frequently instructed to accurately calculate the level of financial benefit that a convicted offender has gained from their criminal fraud, while ensuring fairness in financial assessments and protection of legitimate assets from unjust seizure.”

Sources: Staffordshire Police

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