Brexit Spawned Ecosystem Of Fraud, Says KPMG

The latest reports by KPMG suggest another kind of fallout from the U.K.’s referendum vote last month. The company released its Fraud Barometer this week and said Brexit generated a “perfect ecosystem” for fraud, thanks to economic and market uncertainties.

Analysts at KPMG warned that fraudsters could look to take advantage and “exploit people’s vulnerabilities and confusion about the future” that have risen since the referendum. Already, such cases are happening.

The report highlighted one case in which someone posed as a billionaire banker working for the Pope and swindled a shipping company out of £73 million (nearly $82 million) after offering a FX trading platform that the fraudsters claimed was exclusive to the Papacy.

But less dramatic instances of fraud could occur as businesses are looking to remain strong as the U.K. market slows, which could lead businesses to explore deals and partnerships with unfamiliar parties.

“While economic conditions remain soft, it is unsurprising that commercial enterprises and investors are looking for new ways of making money, often dealing with people they have not encountered before,” explained KPMG U.K. forensic partner Hitesh N. Patel. “For commercial businesses, two of the biggest frauds recorded this year progressed so far because the fraudsters were able to create a reputational illusion, convincing victim companies to hand over large amounts of money — often sums that materially impacted their ability to operate.”

“As the environment for business continues to be tight and competitive, fraudsters are able to hide easily among genuine businesses,” he continued.

KPMG’s report also found a decline in the value of fraud, which hit about $368 million in the first half of 2016, down from about $432 million in the first half of 2015.

But Patel explained that this decline is due to a drop in low-value fraud cases; KPMG warned that this decline may be temporary. The average value of each fraud case increased to $3.26 million in 2016, up from $2.7 million in 2015, according to reports.