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I heard clearly what my hon. Friend said about the letter that he received from the Financial Services Authority, and that raises an important point. We must ensure that the regulations that sit behind financial institutions
operate robustly and clearly. I hope that the Minister will say that she has had contact with her colleagues at the Department for Business, Enterprise and Regulatory Reform to ensure that the regulation of financial institutions dovetails with other provisions so that we have a streamlined process. When I asked about that a few months back, however, I was given no real assurance that that was happening. Even if we assume that this is the right way forwardthere are very real questions about thatthe issue must be addressed at several different levels to ensure that regulation is robust and effective.
The second part of the issue relates to the manner in which the police deal with such matters, and there is a certain chronology to the way in which different police forces are intended to investigate such crimes. First, there is the police force covering the location of the fraudulent operation, and then the police force area where the greatest number of individual usages has taken place. We then move down to the police force area where the first offence was committed and finally to that where the victim is located. I appreciate that we need a protocol and standards in place, but such an approach highlights the bureaucracy and complications involved. When someone has become a victim of a crime and wants something done about it, they must go through such a process or even get their Member of Parliament involved if they want the issue addressed.
Andrew Selous: Does my hon. Friend agree that one important change that should be made is that people who have their money stolen should be referred to as victims, even if they are reimbursed? That, however, is not how I read the introduction to the Fraud Act 2006.
James Brokenshire: The clear point that is being made is that fraud is not a victimless crime, and any suggestion to the contrary is counter-productive and unhelpful in ensuring that we crack down on fraud.
Where an account holder does contact the police to report this matter without having first spoken to their financial institution, a crime related incident will be recorded and the account holder will be referred to their financial institution.[Official Report, 2 July 2007; Vol. 923, c. 462W.]
I appreciate that one reason why that change was introduced was that peoples experience of reporting such crimes to police stations was not good. Trying to get someone to focus on such things was difficult, and the whole experience continues to draw criticism from individuals and the business sector. However, something is wrong if someone who has taken the time and trouble to report something to the police is turned away and told, Its not our problem. Its not something we really want to be involved in. Again, there is the question of whether such things are regarded as important and of what message that sends out. That also plays into the issue of whether people will actually bother to report fraud to the police or their financial institution if they are not confident that something will be done about it. If they do not, we will end up with under-reporting and under-recording, and the law enforcement agencies will not have a proper indication of patterns of offending or the nature and scale of the problem that we face.
I have a lot of respect for the dedicated cheque and plastic crime unit, whose representatives I have met. I have been to see its facilities, and I know that it takes this issue extremely seriously. The City of London police, as the ACPO lead on the issue, has also been pushing hard to raise the issue with the Government in the context of the ongoing fraud review, which I shall discuss shortly. However, there is not a level playing field in terms of the response that people receive from individual police forces, and although some police forces are very good, some are not. The Governments target-driven approach perhaps means that if we do not have a target, the issue is not a priority. That has perhaps meant that the discretion that people should have to treat crimes seriously has been fettered, with the result that the offences that we are discussing cannot be treated properly.
I was shocked to hear about an individual case involving a financial institution. The institution had packaged up a number of offences, followed the protocol and given the case to the local police force that was responsible under the ranking system. First, nothing happened. The institution pressed again. What happened? The material was given to the dog handler. The institution was frustrated because it had tried to package the offences up and to give 20 different offences to an individual police force, after which nothing happened, and they were not treated seriously. Getting fraud prioritised and dealt with as a serious crime, in relation to cost and the increasing number of victims falling foul of it, is a serious issue. With the advent of the internet, and the changing nature of offending, the problem will become more serious, and we are not properly prepared either for the threats that we must withstand today or those that the country will face in the months and years ahead.
It seems that there has been no proper assessment of the manner in which the system is being operated. My hon. Friend is right to urge the Minister today to undertake an assessment of the practicalities of the system and the proportion of cases that are actually reported to police forces after financial institutions have been notified, and to find out how many are then investigated. There is no real incentive to take the issue seriously. The way the scale of the problem is almost masked can, in some ways, bizarrely, suit financial institutions, in that it does not show the scale or nature of the problem. One might say that it also assists the Home Office, in that it ensures that the crime figures do not record that level of reporting.
the lack of a national strategy meant that some problems are not being addressed.
From the reports that we have received, and the individual reports of cases, that is an understatement. However, one thing that has come out of the proposal is the establishment of a national fraud strategy and a national fraud reporting centre. In principle, that is clearly a good idea, but I am entirely unconvinced about how it will work in practice. It is one thing to establish a national fraud reporting centre, but how will that fit into the arrangements that have been described this morning? How will it be promoted so that people understand that they should and can report individual
incidents to the national fraud reporting centre? What guarantees are there that, even if the reports are sent through, something will be done to provide a proper insight into the nature of the problem and to ensure that criminals will be convicted of related offences, with a consequent reduction in harm?
One of my concerns is that the online environment and the e-crime aspects of fraud reporting have not been properly factored into the establishment of the NFRC. Many industry players to whom I have talked say that that does not appear to have been on the radar screens until very recently. Therefore, practically, I have significant concerns about how effective the arrangements will be. Judging by the feedback that I am receiving, the prognosis is not good. I should be interested to hear from the Minister how the NFRC will tie into the existing reporting arrangements, and what comfort there will be in the sense that, if reports are made, something will be done. Will financial institutions be obliged to share reports with the NFRC? Otherwise it seems as if there will be no meaningful picture on the nature and extent of, or trends in, financial fraud.
The Government have not been speedy in coming forward to address the matter. It does not appear to be the priority that it should be. I suggest that the approach to credit card fraud and e-crime has been lacklustre. Clearly, there is a growing problem, but the Government appear to prefer to see it as someone elses, not theirs. Sadly, it looks as if in the months and years ahead the consequence of that inaction will be that more people will fall victim to this growing crime, with all its impact and effects.
The Parliamentary Under-Secretary of State for the Home Department (Meg Hillier): I congratulate the hon. Member for South-West Bedfordshire (Andrew Selous) on securing the debate. I commend him for raising this important issue in his characteristically measured, calm and well researched way.
The hon. Gentleman has raised some interesting and useful points. He has rightly pointed outas the hon. Member for Hornchurch (James Brokenshire) has mentionedthe impact that such crime has on people. The Government agree that credit and debit card cloning is not a victimless crime. Not only are the individuals who are targeted victims, but the whole of society effectively becomes a victim, because of the issues that he has raised.
It was sobering to hear the example from the hon. Gentlemans constituency involving 745 transactions at one petrol station. However, it is worth highlighting the fact that fraud is not rampant at petrol stations. Rather, those are working environments where transactions are very frequentpeople pour through making vast numbers of transactions, which are often small. Overall, such compromises occur in very few petrol stations. There is no particular reason to target petrol stations, other than the fact that they are retail outlets with high transaction rates.
It is worth going into the background to set the scene on the issues around fraud, which have been raised by hon. Members from all parties. I remind the Chamber that credit and debit cards are genuinely a very safe way
of going about business. I take issue with the hon. Member for Hornsey and Wood Green (Lynne Featherstone) on her example concerning pensioners and bank accounts. I am not sure whether it is her partys policy to suggest that it is safer for people to carry large amounts of money. Having had direct contact with many pensioners, and thinking about the amount of money that they could carry around, it is safer for their money to be in a bank account than it is for it to be known that people carry cash in the street or have cash at home.
Lynne Featherstone: I do not want to labour the point, but I simply meant that vulnerable people with very little money can be more exposed if they have to wait for the banks to negotiate or if the banks extend the period before reimbursement, when presented with a case of fraud.
Meg Hillier: If I have time, I will touch on some of those points later. We must remember that criminals will identify loopholes and weaknesses in any payment system. The hon. Member for Hornchurch is right when he says that Government and other bodies must be fast-moving to keep pace with that, which is why the Government work closely with industrythe fraud units in industry and banks are often ahead of the game. The Government take the matter seriously, and it is wrong to say that we do not, but it is important for us to work in partnership with others, because we cannot solve the problem alone. There are responsibilities among the financial institutions, and individuals to try to protect against fraud, and the Government clearly have a role. I shall outline what we have been doing, explain why we should not be thought complacent and discuss how we work with the financial sector and law enforcement to improve the situation and tackle fraud.
Levels of plastic card fraud are higher than we would like, but I want to nail one myth: it is not impossible to go to the police to report an incident. An individual is still entitled to go to the police, but the first port of call would normally be the financial institution. The reasoning behind that is that there was a very low rate of reporting to police. Around 5 per cent. of relevant crimes were reported to them, as far as we could identify. It is difficult to be absolutely sure of the reporting level, but it was a very small number. In a case in which, for example, someone is clear that the fraud happened at a particular physical location, it is clearly sensible to report it to the local force, so that something can be done about it in real time. However, that does not negate the importance of gathering intelligence from a range of financial institutions to monitor patterns, which can be passed on to the police.
James Brokenshire: Will the Minister accept, however, that when someone takes the time and trouble to go to the local police station and queue up to report an individual financial fraud, and they are then turned away by someone who says, I am sorry; we cannot help you and you must refer it to the financial institution, it hardly sends an encouraging message about reporting such incidents again?
I cannot get drawn into what individual police station front desks might say, but if there is a problem with machines attached to banks cloning cards, as in the hon. Gentlemans constituency, the local police would take an interest. However, they
would also gather intelligence, because a one-off situation might be lower priority than a situation involving regular contact. It is important that the police set their priorities and determine the most important issues to resolve. I just wanted to nail the myth that people cannot report such incidents to the police. However, it is important that the system works both ways.
they would only investigate the crime if the real victimsthe banks and credit card companiesreport the problem, as they are the ones who actually lose money.
Meg Hillier: I am not familiar with The Luton News, but I look forward to receiving a copy and passing it on to the Under-Secretary of State for the Home Department, my hon. Friend the Member for Gedling (Mr. Coaker). I am sure that he would be interested to read about that approach from the local police in Bedfordshire.
As the hon. Gentleman has rightly acknowledged, chip and pin represents a major improvement in tackling card fraud. It was introduced to tackle precisely the type of fraud that we are discussing today. The chip makes it impossible to use a cloned card in a cash machine and for a criminal to use a lost or stolen card. The Government supported the banks in introducing that, and fraud on lost or stolen cards fell by 23 per cent. in 2006, compared with 2005, with a further 15 per cent. fall in the first six months of 2007. Losses in this country have fallen, but that has led, as we have heard, to clever approaches by fraudsters to use those cards abroad.
I shall return to my point about how the Government alone cannot solve this problem. I have some sobering statistics that demonstrate the challenge at the international level. In 2006, plastic card fraud losses were £428 million3 per cent. lower than in 2005but in the first six months of 2007 losses increased by 26 per cent., compared with the first six months of 2006. That increase was largely driven by increasing fraud abroad on UK-issued cards. Members will be pleased to know that the European banking industry has set a target of completing its chip card roll-out by 2010, which will protect British citizens and their cards from the sort of fraud that we have heard about today.
Last year, the Home Office worked with the Association for Payment Clearing Services and the Foreign Office in order to raise the profile of the problem in the countries that account for the largest amount of fraud on UK-issued cards, and we continue to engage on an international level. That demonstrates, again, that many other people and Governments need to be involved in tackling such fraud. Hon. Members might be interested to know that fraud on UK-issued cards in America is increasing and that, in 2006, it accounted for 14 per cent. of total fraud losses abroad, so clearly work needs to be done. The industry has found it particularly difficult to engage with bodies in America over this problem. However, the Under-Secretary of State for the Home Department, my hon. Friend the Member for Gedlingthis is primarily his area of responsibilityrecently agreed to write to his political counterparts in the United States to raise the profile of the problem. We hope for progress on that and co-operation from the Americans.
James Brokenshire: The Minister has talked about the international aspect, but will she comment on how the Serious Organised Crime Agency fits into the matter? How much of a priority is card fraud for it?
As hon. Members have mentioned, the Government introduced a fraud review, which led to us allocate £29 million in order to implement recommendations arising out of it. I shall list the key points: we are setting up the national fraud strategic authority, which will drive UK anti-fraud strategy, as hon. Members have mentioned; we will establish a national fraud reporting centre, which will help to improve our intelligence and information on fraud; and we will establish a national lead force, which will enhance policing capacity. City of London police will be the lead force, and it is already the lead for the south-east. We want to build on its work and expertise in that important area.
I shall explain the rationale behind the approach since April 2007, particularly because it has been criticised by the hon. Gentleman. However, I am pleased that the hon. Member for South-West Bedfordshire has acknowledged that the change to reporting to financial institutions was not necessarily wrong, although, as he has rightly pointed out, perhaps we can continue to make improvements in certain areas.
A great deal of fraud is carried out by organised criminal gangs and it is important that we develop policies in order to understand how best to deploy resources against them. We hope that the improved reporting mechanisms mean that the level of reporting will go up. In many cases, the lack of reporting has meant dealing only with police figures, which are very low. In 2004-05, some 121,000 cheque and plastic card crimes were reported to police. In 2005-06, that figure fell to 88,000, and it fell to 59,000 in 2006-07. That sounds like a good news story, but the figure from APACS for 2006-07 was nearly 2.3 million.
Clearly, there was a level of under-reporting to police, because most people just want their money back. It is not that people are not interested in passing the information on to the police, but they have busy lives and want to get the real problem sorted, which for them means getting their money back. Clearly, that has an effect on behaviour. I stress that there are very severe sentences for fraud by false representationup to 10 years imprisonment. Severe penalties can follow an investigation, and we want more introduced as a deterrent to people working in that area. The reporting of fraud is important, and we want to make it easier for people. That is why we adopted that approach, which has advantages for all concerned.
Andrew Selous: I am sure that the Minister is coming to this point, but I am not sure when she will finish her speech, so I thought that I would intervene now. I would be incredibly grateful if, before concluding her remarks, she were to address my central point about enabling the police to seize a skimming machine early on. Reporting is one matter, but taking action to capture skimming machines or, even better, to apprehend criminals removing them, is the prize that I am seeking in order to protect my constituents and others from suffering needlessly from such crime over many weeks. Early action should be taken.
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