Luton Borough Council was the victim of a ‘highly sophisticated and organised crime group’ that stole £1.1m that had been earmarked for a local school, investigation reveals.

A report from the National Investigation Service (NATIS) has concluded that South East Midlands Local Enterprise Partnership (SEMLEP) and Luton Borough Council were both victims of serious fraud by a criminal enterprise that had ties to money laundering and cyber-enabled crime.

The investigation followed the misdirection of £1.1m of a SEMLEP Local Growth Fund grant in 2020, which was intended for Mark Rutherford School. Luton Borough Council acts as SEMLEP’s accountable body.

A SEMLEP employee’s user account was hacked by the criminals who then contacted Luton Borough Council from that account to provide them with new bank details for Mark Rutherford School where the payment was due to be made.

NATIS have not been able to recover the funds, although the investigation is ongoing.

Robin Porter, chief executive of Luton Borough Council, welcomed the report and said it cleared up a lot of the ‘mis-information’ that has been reported over the last two years.

‘The report confirms that it was not the council’s system which was compromised and we are pleased that the report clears this up,’ he said.

Mr Porter continued: ‘However, this crime shows how vigilant all organisations need to be with such nasty and sophisticated cyber-criminal gangs operating around the world.

‘We accept the findings of the NATIS report and, as a result of this incident we have introduced higher levels of risk management to further strengthen our payment policies and ensure additional checks are carried out when we are sent requests such as change of bank details.’

David Kleinberg, director of National Investigation Service, said: 'NATIS assisted Luton Borough Council (LBC) in the investigation of cyber fraud by a sophisticated organised crime group to the sum of £1.1m. The investigation has identified a number of suspects and lines of enquiry which Natis continues to follow.

'NATIS has made a number of recommendations to both the council and SEMLEP to further strengthen their internal processes which they have implemented.'