Although fraud has long been an issue in Britain, it has become even more concerning in recent years as both its scope and complexity have grown. According to a recent Treasury Select Committee report, fraud in the UK has reached a point where, rather than declining over the past few years, economic crime has increased.
Office for National Statistics’ (ONS) data published in Q2 last year emphasised the concerning trend. The ONS Crime Survey for England and Wales (CSEW) report shows that overall crime increased by 18% for the year ending December 2021 compared to the year ending December 2019 before the coronavirus, with a 54% increase in fraud and computer misuse offences.
What has changed?
Fraud is not unique to the UK. It’s a problem that affects many countries. However, it has gained attention since the pandemic because of how much time and money people were spending online during the various lockdowns, which were largely made possible by technological advancements. This gives criminals a whole new set of tools to target people.
Cross-border fraud is another major issue for British law enforcement, since most mass fraud campaigns originate abroad. Even if law enforcement uses the internet to find organised crime groups in authoritarian, adversarial regimes like Russia, they are unlikely to be prosecuted in the UK.
Adding to this, the UK government lacks the resources to fight fraud.
According to KPMG’s Fraud Barometer, there were 298 cases of alleged fraud that were brought to court in 2021 (up from 180 in 2020). On the other hand, the opposite trend was seen in terms of total value of fraud that was brought before UK courts in 2021, which decreased significantly from £724 million in 2020 to £444.7 million in 2021, indicating a trend in the opposite direction.
KPMG’ report notes that while cases in UK courts provide an indicator of fraudulent activity, the number of cases is relatively low when compared to the number of cases of fraud reported to Action Fraud. There were 875,622 reports made to Action Fraud, with a reported loss value of £2.35 billion between 2020 and 2021, which highlights the harsh reality that relatively few cases are brought to court.
Britain has not been good at prosecuting fraud in the past. This is partly because the ecosystem of economic crime prosecution is not well connected.
Fraud – both civil and criminal – is a complicated legal topic, and it can be challenging to support such claims, the ICAEW says. There are overlapping investigating and prosecuting bodies in the criminal justice system, each with varying levels of expertise, resources, and competing priorities. It is imperative that the UK address the problem of funding law enforcement.
Think tank, The Police Foundation, reported in 2018 that the police’s response to victims of fraud was “inadequate.” The study came to the conclusion that “fraud is not prioritised by the police” because only 0.8% of police officers are assigned to work in specialised economic crime teams. This suggests that there aren’t enough resources set aside specifically to fight fraud.
In the UK, introducing laws like the Bribery Act and the Economic Crime Act or making accountants more responsible for detecting fraud in audits goes some way towards helping to combat fraud, however, enforcement systems, oversight, and governance are weak.
Too many parties involved
One of the biggest challenges to preventing fraud in the UK is the uneven distribution of organisations charged with doing so. The number of organisations fighting fraud was estimated to be around 20, including various police forces. One of the organisations tasked with preventing fraud, the National Fraud Intelligence Bureau, keeps track of and compiles data on fraud offences reported to the police by Action Fraud and two industry bodies, Cifas and UK Finance. Cifas reports instances of fraud where its member organisations have been victims.
The Treasury Select Committee found that while many agencies fight economic crime and fraud, law enforcement does not prioritise it. The report recommends a single law enforcement agency with clear goals to combat economic crime.
Fraud is advancing
Phishing is now one of the primary ways that fraud is committed. 53% of CSEW respondents said they had received emails, texts, or social media messages that might have been phishing attempts.
Fraudsters are also exploiting pandemic-related behavioural changes like online shopping to commit advance fee fraud and consumer and retail fraud – the crime survey shows that from 2019 to 2021, computer misuse offences more than doubled to 1.8 million.
However, offences involving “unauthorised access to personal information (including hacking)” saw the biggest increase. This includes victims’ email or social media accounts being compromised, as well as victims’ personal information being exposed as a result of significant data breaches.
Because organised crime syndicates are more agile and adaptable, fraud will not decrease in Britain until the government allocates enough resources to fight it. Doing so requires a multi-faceted approach, involving technological advancements such as the use of artificial intelligence and more comprehensive data sharing between government departments, law enforcement agencies, and the private sector.
Tackling fraud in the workplace
Fraud is now a bigger threat to businesses than ever before, so companies must be proactive about preventing and detecting it.
The hiring procedure should always include thorough employee screening. Simply put, businesses will be better protected against risk if they hire or promote employees who are unlikely to commit an offence in the first place.
Advanced screening verifies what a candidate says and provides information that may not meet the voluntary disclosure requirement, helping businesses make a fair and well-informed business decision.
Ken Dulieu, Chairman of Capcon, specialists in fraud detection and risk management within businesses and other organisations, comments: “The first line of defence against potential dangers to a company is to know the people you are dealing with, particularly those who hold trusted positions. This can be achieved by conducting an exhaustive investigation that goes beyond the individual’s voluntarily disclosed information and aims to unearth any possible risks to the company.”
Additionally, it is crucial for businesses to be aware of the key warning signs of potential fraud, such as lifestyles far exceeding the pay scale, vehement opposition to modifications to accounting or reporting practises, indications of compulsive gambling, drug or alcohol abuse, increases in invoice volume, inventory shrinkage, or any known strong political affiliations.
“When a business has reason to suspect fraud,” Ken Dulieu continues, “it is critical for the company to commission a professional investigation to determine whether or not the suspicion is founded, the scope and duration of the fraud, and the techniques used. Be extremely cautious about making accusations before you have all the information, as doing so could result in a legal action being taken against the company.
“My strong recommendation for Step One would be to make sure that everyone you deal with is subjected to professional screening. This screening should ideally take place before any employment or trading takes place, but it should also be considered after. It’s a straightforward step to take that is reasonably priced and makes logical sense, and it could save you from a crisis affecting either your finances or your reputation.”
Ken Dulieu is an experienced white collar fraud investigator. He is chairman of Capcon Ltd and a partner in Aquila Advisory, a boutique forensic accounting firm.
Find out more about Capcon’s Executive Screening & Compliance Services.