FRAUD cost South East businesses more than £280 million in the second half of 2002. According to the latest figures from KPMG Forensic's Fraud Barometer -- based on major cases involving charges of more than £100,000 -- the value of fraud rose from £147.6m to £283.1m.

The number of cases went up from 11 to 17. In the full year, the value of fraud went up from £117.5m in 2001 to £430.7m. Among the cases reaching Crown Courts in the South East was a financial scam involving a man who siphoned £1.5 million from the accounts of a Kent engineering company to fund a lavish lifestyle.

Paul Tombleson, director of KPMG Forensic, said: "Businesses should act now to put a response plan in place which will determine what actions need to be taken and by whom, so that if they suspect that any type of fraud has occurred, they can act quickly to mitigate any losses.

"If they are to stand a chance of preventing fraud in the first place, businesses need to understand the risks they face. One way of achieving this is by carrying out a fraud risk assessment of their riskiest areas: We've found that treasury, procurement, inventory and payment systems are the areas of the business where fraud is most likely to occur."

Nationally, the total of fraud cases trebled to £717m in the year ending December 31, 2002, the second highest figure since the Fraud Barometer was launched in 1990. The average fraud case more than doubled from £3.6m to £8.6m.

VAT and other tax frauds accounted for more than 40 per cent of the total frauds last year, by value of case, a much higher figure than that reported between 1999-2001.

This substantial increase was due to the inclusion of one very large case -- an alleged VAT trader fraud of £162 million in an Irish technology company.

This type of fraud normally involves the fraudster obtaining the VAT registration from another country to acquire VAT free goods, and then selling the goods on at VAT inclusive prices and pocketing the tax that should have gone to the Chancellor.

Public sector fraud showed the highest value of fraud by sector with a total of £318m, compared to £20m a year before. The growth of new types of fraud such as identity theft also helped to boost last year's national figures.

Mr Tombleson explained: "Identity theft is one of the fastest growing areas of fraud. Not surprising when you consider the ease with which credit cards can be obtained by fraudsters through the use of false documentation."

KPMG Forensic has a European team of more than 300 people, including former police officers, forensic accountants, data mining consultants and fraud risk management specialists.