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Fraud has reached "epidemic levels" in the UK – what can be done?

Posted on 15 February 2021

In a recent paper, Royal United Services Institute (RUSI) researchers described fraud as being at “epidemic levels” and the form of crime most likely to affect UK residents. They argue fraud is a substantial vector and enabler of serious organised crime and therefore represents a serious but underappreciated national security threat. The paper further asserts that current prevention and enforcement are inadequate to the task, with fragmented and underfunded regional police fraud units struggling to effectively tackle, or even understand, this highly complex and transnational form of crime. This article argues that it is time attention was paid to how the private and public sectors can tackle fraud together.

Fraud by the Numbers

In February 2021, the UK Office for National Statistics (ONS) estimated that from September 2019 to September 2020 approximately 4.4million fraud offences occurred in England and Wales, a figure roughly consistent with previous years. A 12-month rolling tracker maintained by the City of London Police National Fraud Intelligence Bureau (NFIB) indicates that from February to September 2020, only 521,210 fraud offences were reported via Action Fraud, the UK’s central portal for reporting fraud and computer misuse offences. These figures suggest that fraud is chronically underreported, with most offences never being notified to the police. Annual losses from fraud offences are difficult to quantify, the available data indicates that reported losses are likely substantially lower than the true figure. While NFIB figures put reported losses from February to September 2020 at around £1.6 billion, a 2017 academic paper estimated losses resulting from fraud against individuals at that time to total around £6.8 billion per annum. The paper estimated that total losses from all fraud against the private sector, including individuals, was about £147.2 billion.

During this period the Crown Prosecution Service (CPS) brought 39,170 prosecutions for “fraud and forgery” offences, approximately 86% of which resulted in convictions. It is important to note that as a significant proportion of fraud offences in the UK are conducted from overseas, CPS prosecution rates can only ever provide a partial picture of enforcement action. Fraud is also frequently conducted at scale by organised crime groups, meaning that small groups of offenders can be responsible for very high volumes of individual offences, limiting the usefulness of prosecution rates as a metric of enforcement success. These figures also do not account for disruptive actions, such as criminal infrastructure takedowns, which inhibit the capability of fraudsters to operate without necessarily resulting in arrests and prosecutions. However, the stark differential between ONS estimates of fraud offence volumes, reports to the police, and actual prosecutions indicates that most offences are not reported and even very few offenders are prosecuted in the UK relative to the volume of offences which occur.

Addressing the problems

Even at the level of local policing, this is not a problem which can be simply solved by throwing resources at it; if every police force in the country did nothing else, they would collectively still not have the bandwidth to investigate 4.4 million fraud offences per year. As the RUSI researchers argue in their paper, more germane is the fact that despite reports being centrally received by Action Fraud, fraud offences are assigned to regional forces for investigation, many of which lack the resources, personnel, and specialist training to investigate complex organised crime. A lack of national level co-ordination also creates unnecessary barriers to information sharing and co-operation, as well as making international collaboration more challenging.

While centres of excellence do exist, notably within the City of London Police and the Metropolitan Police Service, the researchers argue that fraud policing needs nationally centralised leadership, potentially within the National Crime Agency (NCA), and resourcing commensurate to the threat. The creation of the National Economic Crime Centre (NECC) in 2018 represented a positive movement in this direction by placing firm emphasis on national level co-operation both between Government agencies and private sector entities. Its work to date has however focused heavily on fraud prevention and there is further work to be done around centralising the work of investigating fraud and pursuing offenders.

Beyond policing, the researchers also argue that a “whole system” approach to fraud is required, incorporating other Government agencies (such as GCHQ and the National Cyber Security Centre) and significantly enhancing collaboration between Government and the private sector. This is an area which merits significant further exploration; effective fraud enforcement through policing alone is not possible with current constraints on resources and new ways to tackle the issue should be welcomed. Many private sector organisations possess capabilities highly complementary to those of law enforcement and other Government agencies, so there is the potential for private firms to take up slack in areas where the police lack capability or capacity, such as recovering funds or bringing private prosecutions.

There is also opportunity for enhanced investigative collaboration and partnership, with the private sector supporting law enforcement with specialist capabilities such as digital forensics, e-discovery, and cyber investigation. While these capabilities exist within regional police forces and national agencies, resource constraints mean there is often limited capacity to conduct this work and there is scope for greater use of private sector specialists in direct support of police investigations. Mishcon de Reya help victims of fraud recover losses and take action against wrongdoers through criminal and civil means, frequently working in tandem with the police

The UK's problems with fraud are both deep rooted and systemic; quick fixes can, at best, serve only to mask the underlying issues. Instead, long-term political will is required. If it can be found, there is however the potential for substantial benefits, not only as a result of a reduced drain on economic activity but potentially also in the form of second-order effects on other forms of serious organised crime. Fraud is, as the RUSI researchers termed it, a “silent threat”. It is time for some noise to be made.

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