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Councils 'lose £7m in false bank account scam' | Councils 'lose £7m in false bank account scam' |
(about 9 hours later) | |
Councils have been conned out of more than £7m by criminals using information put on their own websites under transparency drives, a survey says. | Councils have been conned out of more than £7m by criminals using information put on their own websites under transparency drives, a survey says. |
The Audit Commission said officials were being tricked into making payments - intended for building firms and other contractors - into false bank accounts. | The Audit Commission said officials were being tricked into making payments - intended for building firms and other contractors - into false bank accounts. |
The problem emerged from the survey of 480 public sector organisations. | The problem emerged from the survey of 480 public sector organisations. |
Housing Minister Grant Shapps said it was "disappointing" some councils had not heeded advice on combating fraud. | |
The Audit Commission found that councils across England detected more than £185m worth of fraud last year - up 37% on 2009/10. | |
Councils said fraud cases were rising because the current economic climate was putting pressure on people's personal finances and "tempting" them to commit fraud. | |
They also said a reduction in staff numbers due to cutbacks was weakening internal fraud controls. | |
Phone calls | |
The report said the effort to increase transparency in procurement was being used against councils. | |
Criminals from the UK and overseas have sent legitimate-looking letters, based on creditor information published on the internet, to persuade officials to change account details and redirect payments to them. | |
They have often followed up these letters with phone calls to chase supposed payments. | |
In some cases, the report noted, firms' phone lines were temporarily diverted to fool staff trying to check original records. | |
Several such cases cost councils £7m, and among those duped was Cumbria County Council. Councils in Scotland have also been targeted, including South Lanarkshire. | |
But similar scams - which would have cost councils a further £20m - were discovered before payments were made. | |
In one case, a single fraud amounting to £5m was prevented after staff spotted the problem. | |
In that instance, a fraudster used a legitimate invoice from a supplier published online in an attempt to verify his request to change the supplier's bank account details. | |
The Audit Commission now wants stronger warnings across the public sector to stop the problem from spreading. | The Audit Commission now wants stronger warnings across the public sector to stop the problem from spreading. |
Other findings from the survey included: | Other findings from the survey included: |
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Total fraud committed against local authorities is believed to be more than £2bn, according to the National Fraud Authority. | Total fraud committed against local authorities is believed to be more than £2bn, according to the National Fraud Authority. |
'Shocking' | |
Chairman of the Audit Commission Michael O'Higgins said councils were acting on fraud but warned the figures in the survey may be "just the tip of a very large iceberg". | Chairman of the Audit Commission Michael O'Higgins said councils were acting on fraud but warned the figures in the survey may be "just the tip of a very large iceberg". |
"Our report shows fraudsters will exploit any system weaknesses, from an individual's care budget to a multi-million pound building contract," he said. | |
Mr Shapps said councils were not doing enough to reduce the "shocking" sums being lost. | |
"The government gave councils clear and explicit guidance in February on how to avoid payment fraud, and it's disappointing that some councils haven't taken it on board. | |
"Councillors should be scrutinising what steps their council officers are taking to tackle fraud and protect the public purse." | |
He also said councils could do "far more" to prevent other types of fraud, for example, through better credit checks on benefit claimants and proper vetting of staff who handle money. |