Steven Mugglestone

The more I learn, the less I know

Pop Pickers, Top 20 Scams and Frauds of 2011 and Warning for 2012

leave a comment »

Pop Pickers, Top 20 Scams and Frauds of 2011 and Warning for 2012

We all know that we are in recession and prospects of business growth remain challenging.  We also know that in economic times like this, we all have to be more imaginative and more creative in business ventures and ideas.

One area that does not diminish in a recession is fraud and scams.  In fact the willingness to lie, cheat and steal from the state, big and small businesses and people in general seems to grow unabated.  The imagination and brass neck cheek is sometimes astonishing, but we continue to live and learn.  According to BDO, reported fraud in the UK over the past 5 years has now topped £7bn, which is equivalent to what the UK spent online over Christmas 2011.

To act both as a warning and to give some insight into what fraud and scams look like in 2011, we have highlighted some of the more “popular” and “common” reported cases:

Clairvoyant benefit fraudster didn’t see it coming

A Welsh clairvoyant admitted to unlawfully claiming over £33,000 in income support, jobseekers allowance, housing benefit and council tax benefit whilst working as a telephone psychic reader and a sex chat-line operator. Dawn Pearson charged customers £1.53 a minute for psychic consultations, while claiming a wide range of state benefits for being too ill to work.

Inventing children is a little too obvious

Kerry Melia was jailed for eight months after ‘inventing’ 15 foster children to illegally claim more than £60,000 in benefits. Despite already being under investigation by HMRC for submitting false claims for 10 non-existent youngsters, Melia asked for help supporting a further five foster children before finally being taken to court.

Learning from James T Kirk does not help

A Chinese gymnastics official was charged with fraud after falsifying a score to help a compatriot win a gold medal at a major tournament. The International Gymnastics Federation found that Shao Bin had ‘altered an execution score prior to posting’ without telling event officials, resulting in a gold medal for gymnast Zhang Chenglong in the men’s floor exercise final at the Asian Games.

Learning from Jeremy Kyle does not help either

Amie Burn and Claire Hardy pleaded guilty to conspiracy to pervert the course of justice after attempting to falsify a paternity test. Burn had paid Hardy £100 to take her place at the court-ordered test in order to prove that her former boyfriend was not the father of her two-year-old son, thereby denying him access to the child.

Double booking at a minimum

Derren and Tracy Grant from Wincanton were jailed for 27 months and nine months respectively after being found guilty of advertising an occupied villa for rent in Spain. Some 300 holiday makers lost more than £100,000 in the fraud. In one incident, it was alleged that as many as 12 parties had been booked into the same property at the same time.

Vodka from meths and bleach

Kevin Eddishaw was jailed for seven years for manufacturing thousands of bottles of fake vodka using methylated spirits and bleach. Investigators estimated that 165,000 bottles of the falsely-branded Glen’s Vodka had been made before Eddishaw and his team were apprehended.

Shaggy dog insurance claims

Julie Pullman was failed for nine months after fraudulently claiming £37,000 to cover the cost of treating her non-existent pet dogs. Pullman had created fake vets’ bills in order to receive payment from her insurance company. Worryingly, there has been a growing number of reports of owners selling, abandoning or even killing pets in order to claim for early death.

A warning for HS2

The Chinese National Audit Office (NAO) revealed that 187 million yuan (around £20 million) was misappropriated by individuals or companies involved in building the 1,318-km Beijing-Shanghai high-speed railway. The announcement followed the dismissal of railways minister Liu Zhijun.

PT Barnum and a sucker born every day lives on

Peter Gillespie, a chartered accountant from Windsor, was jailed for eight years for importing fake drugs from China and selling them as genuine medicines for cancer, heart conditions and mental illness. The medicines were used by pharmacies, hospitals and care homes, and it is believed that at least 100,000 doses ended up being given to patients. Gillespie was caught after a wholesaler spotted a mistake on the packaging.

Green fraud and carbon emissions

Six men were jailed in Germany for a 300 million euro (around £249 million) fraud involving carbon emission permits. Three Britons, two Germans and a Frenchman bought the permits overseas without paying any tax, then resold the permits to each other in order to fraudulently claim the tax back. The judge told the perpetrators that they had brought “the carbon market trading scheme into disrepute.”

Land banking (if it’s too good to be true, it’s too good to be true)

Rogue property developers selling land that they claim has great investment value, when there is little or no chance of it ever being developed, are on the rise. Investors who have purchased a stake in plots of land that turned out to be worthless have lost an estimated £200 million.  This involves plots of land offered for sale, often online, with the promise of sizable returns when planning permission is approved for housing or other development. Yet often the land is located in areas protected from development by planning law.

The companies involved soon disappear with investors’ money and as the firms are not protected by the Financial Services Authority, their funds are not covered by the Financial Services Compensation Scheme.

Money laundering by money mules

Cases of money mule fraud have soared during 2011, according to figures from CIFAS – the government’s fraud prevention agency – which show an increase in the number of both knowing accomplices and innocently duped individuals.

The misuse of facility fraud, which involves an account or policy that has been legitimately opened but is later used fraudulently, rose 12% in the first ten months of 2011. CIFAS reports that a large proportion of the frauds display the hallmarks of ‘money mule’ activity; where a fraudster recruits another (often innocent) party and uses their account to launder money on their behalf.

Fraudsters recruit unknowing accomplices through email under the guise of offering employment, seeking a personal favour, or through internet shopping sites. The recruits are persuaded into receiving what are essentially fraudulent payments and then passing funds on. The ‘mules’ are frequently offered a small financial incentive to encourage involvement and face difficulties in proving their innocence when the fraud is discovered.

More Green and Carbon credit fraud

Between July and September 2010 the Financial Services Authority reported a ten-fold increase in carbon credit fraud, which lures investors in with the promise of steady returns and a tug on their eco-friendly conscious.  These claim to offer people the chance to profit from carbon credits. Under regulations that permit businesses to emit a tonne of CO2 – the companies claim to offer investment in green projects like a forestry scheme or a solar panel project, which generates carbon credits that are then sold on to heavy industry.

A flashy brochure or website tells of a reliable ‘government-backed’ scheme which provides reliable returns for investors. Such a scheme doesn’t exist however – the truth investors only discovered when they have parted with their cash and the company is untraceable. As with land banking, fraudulent companies are not covered by the FSA so victims have no course for recompense.

HMRC offering a tax repayment (obvious really – phishing scam)

Receiving an email from the taxman saying you are owed a payment may seem like a nice surprise, it is highly unlikely and is actually from fraudsters trying to relieve you of your cash instead.  HMRC sas confirmed that reports of fraudulent ‘phishing’ emails have risen by 300% over the last year. Almost 24,000 such emails were reported to HMRC in August alone and the office is currently helping to shut down around 100 scam websites a month.

The emails provide a “click-through link” to a cloned replica of the HMRC website. The recipient is then asked to provide their credit or debit card details – all the information the criminals need to clear your account, and sell on your personal details.

HMRC warns anyone receiving an email claiming to be from them telling the taxpayer they are due a tax repayment not to follow the email’s instructions. HMRC says it will never email or telephone taxpayers about refunds and only write to inform by post.

The great disappearing loan scam

This scam targets vulnerable people who are in financial difficulty and unable to access credit through regular channels like overdrafts and credit cards. The fraudsters advertise loans and those that sign up are asked to pay an upfront ‘arrangement’ fee of around £60-£70 fee before the loan is approved. Borrowers pay the fee only for the ‘loan providers’ to disappear without a trace.

In truth, due to poor credit history or lack of income, the applicants are unlikely to be approved for a loan in the first place, but the fraudsters have no intent in pursuing the application anyway.

Crash for cash scams

While honest motorists battle rising insurance premiums, those to blame for the price hikes continue to undertake fraudulent claims. Insurer Direct Line reported a hike in the number of ‘crash for cash’ scams this year – where fraudsters fake accidents by making unnecessary emergency stops at busy roundabouts or slip roads, forcing motorists to crash into them. They then make bogus claims to the innocent motorist’s insurer, often including fictitious injuries and passengers.

Driving school scam or why I am such a bad driver

Learner drivers have been taken for ride by being unknowingly taught by trainee instructors. An investigation by the AA found up to 27,000 extra driving tests have been failed in the last year because one in 10 learner drivers are unwittingly taught by an instructor they do not know is learning on the job.

With research showing much lower pass rates among trainee instructors, they have cost learners over £1.7 million in additional test fees over the past 12 months, with millions more believed to have been spent on extra lessons needed to reach test standard.

The AA is lobbying ministers to introduce new rules requiring driving schools to tell learners, at the time they book lessons, if their instructor will be a trainee.

The thieving magpie/postman or the postman always steals twice

A Leicester postman stole £46,686 worth of mail over two-and-a-half years. Yogeshbhai Patel, 38, was jailed for two years for stealing mail including 2,000 DVDs and 2,250 games along with CDs and other electrical equipment. He intercepting the valuable packages and spent the money on living a luxury lifestyle including helicopter rides and a trip to Las Vegas.

It is reported that while his bosses thought he was a model employee as he arrived an hour early for work at the delivery office every day, he was actually looking for packages to steal.

Leicester Crown Court heard he then ensured the valuables, destined for other postal rounds, went into his own sack of mail. Patel was caught when investigators received an anonymous tip-off that a postman was selling a large number of games and electrical items to a store in the city centre, where they found a special previously marked X-box game, out of its wrapping, on sale for £1.50.

Smart energy meter scam (Caveat emptor)

The nationwide roll- out of smart meters is intended to help households save money by becoming more informed about their energy usage – but fraudsters have been quick to relieve people of their cash instead.

The Trading Standards Institute reported over 200 cases where elderly homeowners have been targeted by telephone cold callers, purporting to be from their energy supplier and offering energy saving devices which could cut their bills by 40%.

The TSI tested the devices in homes where owners had fallen for the scam, only to find they both failed to satisfy electrical safety standards or deliver any tangible energy savings.

Thermal camera and ATM fraud (Sherlock Holmes would be proud)

As consumers become more savvy at cashpoints by covering the keypad when entering their PIN and avoiding any machines that look suspect – so do the the fraudsters in stepping up their game to grab our cash.  Thermal cameras that track ATM pin numbers are the latest weapon in their arsenal and US scientists have warned it is the next threat for this form of crime. Researchers at the University of California at San Diego found that up to 45 seconds after a person types their pin code into an ATM machine or door entry-pad the numbers and even the sequence are still readable by thermal cameras.

And a final addition, at number 21 and hot off the press, the fictitious franchise and Leicester, again a hotbed of fraud and scams:

You have been warned!

Steven Mugglestone BA FCA,
Finance Director Services
McGregors Corporate, Entrepreneurial Chartered Accountants and Business Advisers
…….Really good for your business

McGregors Corporate are a Member of Probiz Tax, providing Innovative Tax Solutions to Owner Managed Businesses.

T: 0845 519 5659                T: 0121 236 3317

Connect, call, talk, email, contact us, send a messenger pigeon and arrange a discussion, review and free meeting.


Written by Steven Mugglestone

January 10, 2012 at 8:00 pm

Posted in Fraud, HMRC

Tagged with , ,

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: