Midland companies are losing faith in the police and the courts as prosecutions for fraud slump, it was claimed today.

Criminal employees and executives siphoning off company funds either through greed or debt are "feeling invisible" as a result, said Sat Plaha, Birmingham-based forensics partner at accounts BDO Stoy Hayward.

According to BDO, the value of convicted fraud cases in the Midlands dropped from £617.5 million in 2006 to almost half that (£320 million) in 2007. The trend is echoed in East Anglia, London and the South East, Scotland and Wales.

"Fraud is actually spreading like the 'flu," Mr Plaha said. "Until you are hit by it you don't always know how bad it can be. Less fraud is going through the courts and many fraudsters may be feeling invisible.

"The gap between the number of frauds investigated and prosecutions in criminal courts is widening. Our fraud team took on up to three investigations a week in 2007, yet supposedly the amount of fraud is decreasing."

VAT fraud alone cost the UK £541 million last year, £10 for every man, woman and child. Disparity in sentences imposed on those who are convicted is making fraud more profitable for hardened criminals, according to BDO.

Tough sentences are imposed on offenders with drug or alcohol problems while criminals who plead they were driven to fraud by gambling or marital problems are treated more leniently.

Either way, the average sentence last year of 2.8 years for committing a fraud allows fraud-sters to laugh all the way to their offshore bank, as increasingly fraudsters and the proceeds of fraud cross international boundaries, said Mr Plaha.

"When you balance the low chance of being discovered and prosecuted against the millions many white collar fraudsters make, it is not hard to see why fraud is increasing, and more people than ever are getting away with it.

"More people should be taking anti-fraud measures, such as fully checking references, to prevent full blown problems before they detect the symptoms."

BDO's annual FraudTrack research identified 267 reported cases of business fraud (worth above £50,000) in 2007 with a total value of £1.04 billion. This compares with 294 cases with a value of £1.37 billion in 2006, a reduction of 24 per cent.

Non-VAT fraud cases of just £496 million reported in 2007 compared with £913 million the previous year, a fall of 46 per cent).

Some 87 per cent (£432 million) of nonVAT frauds were reported by business in the financial services sector, with all other sectors accounting for only 13 per cent of cases.

"Fraudsters are increasingly trying to maximise their takings by working internationally," Mr Plaha said. "This creates difficulties for those organisations tasked with investigating fraud who find it difficult to cross international boundaries on a timely basis.

"A recent UK-based client asked if data could be captured within two days from a computer on a ship due to dock in Shanghai.

"Co-ordinated by our London office, a Mandarin speaker from our German team and a member of our New York computer forensic team were in a position to meet the ship and assist the client within 24 hours.

"With an economic downturn now already affecting the property and financial services sectors, I expect to see many more frauds being discovered in 2008.

"My advice to businesses is to be rigorous in checking the references employees, including senior executives, temporary staff and those on-site from agencies. In my experience when you check into the background of a fraudster, invariably there is a skeleton in their cupboard or an inconsistency in their CV that, if identified earlier, would have prevented the business becoming a victim."