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Local police need more guidance. People currently report cases of suspected boiler room fraud to their local police station. They should be directed to their local fraud squad and Operation Archway. However, I know of a case in north Wales in which a victim was left in limbo after discovering that the local police force did
not have fraud officers. Not all the police stations in the country know about boiler room scams and they should be brought up to speed.
Does the Solicitor-General believe that trying to combat international organised crime through local police forces is the most effective approach? Perhaps we should think out of the box
As I said, the City of London police told me this morning that their co-operation with counterparts outside the EU is much better than with those in it. Clearly, that should not be the case. Will the Solicitor-General assure me that she will speak to her Cabinet colleagues to ensure that all relevant Departments work together to get maximum co-operation at European Commission level and with our European and international partners?
I want to send a message to anybody out there who may be on the receiving end of such calls and who may think that the so-called brokers are legitimate. Of course people may think that they are legitimate—it is their job to con. I say to those on the receiving end, “Be aware.” If they have an envelope on the mantelpiece with a cheque in it already, they should not send it. Indeed, if they have sent a cheque in the past 24 hours, they should take speedy financial advice about whether to allow it to clear. They need to protect themselves.
We are considering a seismic scam, which leaves a trail of misery, despair, tears and, sadly, in one case that was brought to our attention, suicide. If people do not know about the scam, they cannot protect themselves against it. They cannot protect their money or financial security. If they are left ignorant, they could lose everything, including their lives. That is not good enough. We must all do more.
5.39 pm
The Solicitor-General (Vera Baird): I congratulate the hon. Member for Ribble Valley (Mr. Evans) on securing this debate and on bringing this extremely serious issue before the House. I also congratulate him on his pursuit of the issue in his speech and through the all-party parliamentary group that he leads with the vigour that he has shown today. I thank him further for the unusual step, which should be taken more frequently, of kindly letting me have a summary of what he wanted to say, so that I knew in advance the points he wanted me to tackle. That is a better way of ensuring that we have a good debate than leaving things a mystery and providing the questions all at the last minute.
I agree entirely with what the hon. Gentleman said about the misleading nature of the name boiler room fraud, which does tend to make one think of central heating or ballcocks although it concerns things that are much more venal than that. The cost of fraud is devastating and affects us all. Fraud against business does not just drive up costs for consumers; the cases of Enron, the Bank of Credit and Commerce International and Barlow Clowes show that it puts whole communities at risk. The Government, too, are a regular victim of fraud, and when they are, fraudsters are robbing taxpayers of the modern public services that they have paid for. As the hon. Gentleman has shown, the fraudster’s victim of choice will often come from among our most vulnerable citizens, who are targeted for their life savings and their livelihoods.
Boiler room fraud shows that although fraudsters’ methods may be complex, internationally organised and highly sophisticated, their motive is just simple criminal profit—deliberate, cruel and totally unchecked by any compassion for victims. Numbers are very hard to determine, as the hon. Gentleman said. We get about 100 new victims of boiler room fraud contacting the police each week. Losses range from £3,000 to more than £1 million—a very substantial amount for an individual. The Financial Services Authority estimates that about 2,000 victims contact it each year, with average losses of about £20,000.
The human cost, as well as the financial cost, is often appalling, as the hon. Gentleman’s examples showed. I am glad to hear that he has visited the City of London police; the Attorney-General and I went there a month ago, and indeed, we found them impressive, as the hon. Gentleman clearly did. The appalling story he was told of the lady whose husband was driven to suicide—he lost his life savings of about £200,000 and was obviously completely unable to live with that fact—is a human tragedy of matchless proportions. Another caller to the City of London just sobbed on the telephone and could not explain to the officer at that time any detail of what had happened; she was clearly devastated. One man in his 80s had lost more than £400,000 and was about to buy some more worthless shares when the City of London police were apprised of the scam and arranged for an officer in his local force, which was in Scotland, to explain to him what was happening and head it off.
Those are the depths to which the fraudsters sink. Amazingly, it is not generally seen as evil crime, like violent crime, rape or armed robbery, but it does massive damage to people’s lives. For people to lose the cash that they and their family were depending on for the future produces shame and guilt, and there will be massive under-reporting because such feelings are an ordinary human reaction. People suffer a loss of faith in their own judgment and a loss of self-esteem, all of which is massively more injurious to health than a punch on the nose in the street.
It is a very serious crime that the Government take very seriously, and the risks are rising fast for the perpetrators of such crimes. In recent months, a multi-agency taskforce, co-ordinated by the City of London police, joining with key agencies such as the Serious Organised Crime Agency, the Serious Fraud Office and the FSA, has become increasingly public in its work. That is Operation Archway, about which the hon. Gentleman has spoken. It provides a contact point for victims and a concentrated pool of expertise that turns national intelligence about boiler room fraudsters into action against them.
I acknowledge the hon. Gentleman’s concerns about whether local police are the appropriate people to tackle the issue internationally. However, Operation Archway has worked fluidly across borders, with operations, supporting action and arrests by international partners in the US, Ireland, Hong Kong, Singapore and Gibraltar so far. In the example that he mentioned, the father and daughter who were suspected of boiler room fraud totalling £35 million to £50 million were indeed arrested in the US, but that was with the critical assistance of the City of London police who were safeguarding British victims. Numerous people have been detained in this country and abroad over the past year, as part of seven
major multi-agency operations against boiler rooms. For instance, last week, an arrest operation across five English counties produced a series of arrests of both men and women who were engaged in boiler room fraud.
Although such operations are vital in increasing the risks for fraudsters, parallel efforts are helping to remove their rewards, by tracing, freezing and seizing their stolen assets around the world. Letting fraudsters know that they will not be able to keep their ill-gotten gains is the way to get to the heart of the problem. Anti-money laundering specialists in the City of London police—I will come to more police forces in a moment—found assets in the US, Canada, Belize, Nevis, Cyprus, Tanzania, Lebanon, Latvia and, despite what the hon. Gentleman said, Spain.
The Government’s major reforms have in recent years put criminal assets at risk in a major way, as they never have been before. We have introduced tough asset recovery powers. They were not universally supported as they went through the House, because they appeared at first sight to be quite draconian, but they are working. Those powers are popular and are becoming increasingly tough in their implementation. Financial investigation is becoming an increasingly mainstream part of police work. We are aiming to make the UK a tougher target for boiler room fraud.
Contrary to the hon. Gentleman’s concerns about local police forces and the absence of fraud officers in some places, I am pleased to say that every police force in the country has contacted Operation Archway for advice and support. Those forces will be referring to Archway complainants in inquiries that Archway is taking on. However, local forces are simultaneously taking away advice and support to build up their own capacity, so that they can better tackle such crimes nationwide. There is, I am fairly sure, an element of regionalisation in the location of fraud officers, so that that expertise builds up in bodies that deal with such issues regularly.
We are, however, taking the challenge to boiler room fraudsters beyond the operational front line. We will use all the tools in our power to protect the public and will acquire new ones where necessary. The fairly recent Fraud Act 2006 has brought about a major simplification of legislation on fraud, which is helping to get boiler room fraudsters to justice more quickly. Over-complex law is a recipe for criminals who are used to scheming in the first instance to try to play the system and extend trials. Fraud law is “relatively straightforward”, or at least much more so than it used to be, so that people can see where it is going and jurors can better understand it. As the hon. Gentleman will know, we are holding a public consultation on the implementation of a plea negotiation framework, to enhance the ability of prosecutors to get an early settlement in what might otherwise be complex and lengthy trials.
The Financial Services Authority is not a part of the Government for me to defend or criticise. Essentially, it is an independent authority. However, the hon. Gentleman has put what he wanted to say about the FSA very courteously in this debate. I have read a press releases by him in which he said that it was time that the FSA got its finger out. I am never one to avoid mixing my metaphors, but the FSA would say that it was “all hands on deck”. The FSA regards itself as being tough
in supervising the UK framework of financial regulations and has used its powers to shut down any firm in the UK that has helped boiler rooms, closing seven firms last year, with two people subsequently reported to the police for arrest. A solicitor who had authorised adverts promoting boiler rooms was fined £150,000 and is, I hope, currently in the middle of disciplinary proceedings.
The FSA would say that it is building coalitions against the fraudster with its sister agencies overseas. Co-operation between the FSA and its counterparts in Ontario and British Columbia has helped to recover £1 million of UK victims’ funds. We have to do things all ways. It is fine to simplify prosecutions and to make arrests, but that is after the event, and the money is often a long way away by the time we get to that stage. It is therefore important to think not only about prevention but about earlier intervention, when the money will not be so far away from concealment and might be easier to recover. It would save people who have suffered from that fraud from being demoralised if they realised that they were not alone. It helps them to realise that the fraud is happening across the board, and that they are not so foolish as they think when they self-stigmatise.
We are trying to take action across the board to hold fraudsters who prey on British victims to account, wherever they try to hide. We have to look at prevention, deterrents and detection, as well as disruption. The key agencies with responsibility have taken new steps to make boiler room fraud harder to commit. The FSA shares its intelligence by listing suspected boiler rooms, and its website is much visited, so I think that the hon. Gentleman must have found only one or two pages that were relevant. About 18 new firms are listed each month on the website, which appears to have received a substantial number of hits. The FSA has also shut down sites that are run by suspected boiler rooms.
The hon. Gentleman talked about working with share registrar companies. We understand from the FSA that it works with such companies to include preventive advice as part of the annual reports of legitimate companies, because—we agree on this much at least—people who are already shareholders are commonly the victims of this fraud. The FSA informs us that it is doing that, but, in view of the hon. Gentleman’s comments and the correspondence that he has had, we will go back to it to ask about this. I will write to him to ascertain that I am not in danger of misleading anyone by saying that the FSA is confident that it is spreading information to the people who are most commonly victims.
The FSA takes an up-front role in media activities, working with local and regional radio, TV news programmes and features, and print media. The list gets longer every week. It has not excluded the national press, but people take note of what happened to Mrs. Smith up the street, so they are more likely to be put on notice by something local than by something that they read about nationally.
The FSA also runs a website called “Money made clear”, which is intended to be a public awareness site that rolls out material to raise public awareness about all kinds of scams and swindles, including boiler room frauds. It has a contact centre for people who respond to what they see on the site and who might, as the hon. Gentleman said, appreciate for the first time that they
are in the middle of something and so not write the cheque that someone has been trying to get them to write.
We will build on such progress more centrally in the months ahead. The hon. Gentleman mentioned the new institutions that we are setting up. Fraud has never been higher on the agenda, and the major reforms that he mentioned are under way to make the UK a tougher target for all kinds of fraud, including boiler room fraud. Concerted action is needed to tackle the threat, and not just from the Government. Action is also needed from criminal justice practitioners, charities, business, all the regulators and all the public. They each have a vital role to play and a stake in each others’ success.
As the hon. Gentleman knows, the Government have carried out a fraud review, consulting widely and getting a substantial response. They are driving forward with major changes that are backed by new funding. He asked for reassurance about that: £28 million was allocated for the new institutions in the comprehensive spending review. That funding must be added to the money that already goes to the Serious Fraud Office, which receives both core funding and what is known as blockbuster funding for individual cases. The Crown Prosecution Service has a fraud prosecutions division, which is accumulating a body of expertise. The Revenue and Customs prosecution office prosecutes fraud, as do the Departments for Work and Pensions and for Business, Enterprise and Regulatory Reform. The funding—which will go to different institutions, and also boost the investigation and prosecution arm—is in addition to all of that. The reform programme is not just about prosecuting; it is about concerted action.
The national fraud strategic authority will deliver on the core recommendations resulting from the responses to the consultation. It reports directly to Ministers. The hon. Gentleman asked me when I last had contact with—he was pleased to say—my Cabinet colleagues. There were important Ministers present at the time, and I am in the group. The Attorney-General, who does attend Cabinet, is also in the group, as are all the Ministers to whom the hon. Gentleman referred.
The strategic authority has a mandate to develop a national strategy on fraud that, interestingly, involves setting out a vision of success. This is not a straightforward process; it is important that there should be prosecutions and convictions, but they are after the event for the victims, and asset recovery is absolutely key. Perhaps we should judge the success at least partly by the increasing number of reports. People are often unwilling to report this kind of fraud, but an increase in reporting would make it look as though it was escalating. There will be elements of that, I am sure, and the incidence of fraud will look as though it has gone up when the proposals get on their feet. However, if the strategic authority can set out a vision of what success means, it will be able to develop a national strategy for fraud. There will be a programme of action that involves deterrence, prevention, detection, investigation, sanctions for perpetrators and redress for victims.
A further important component is the national fraud reporting centre, which will have to set up strong links with industry, business and other law enforcement agencies, so as to receive reports. It will need to have networks and tentacles everywhere, so that when Mr. Jones in
Redcar makes a report, it will know that that is a problem not only in Redcar and that there have also been examples in Ribble Valley, for example, and elsewhere. It will then work with intelligence analysts, who will work out, from the individual reports, a better picture of the networks involved, their techniques and the opportunities to bring them to book. It will then send back to the institutions involved—the banks, businesses or whatever—the recipe to deal with the problem.
The Solicitor-General: I shall give way to the hon. Gentleman—I hope fairly briefly, as I have a little left to say.
Mr. Evans: I understand that we can go on until half-past 6, so we are not under a great deal of time pressure.
On financial institutions, why does the Solicitor-General think that the banks and the credit card companies—they are often interlinked—are not taking this matter more seriously? I was given an example recently. If a customer does something that is “out of profile” with their credit card, even if only a small amount of money is involved, the credit card company might intervene and stop the transaction until it can be assured that it is legitimate. The company is afraid that it, or the bank, might lose money. However, if a person who regularly spends small sums of money suddenly tries to wire £100,000 to the Dutch Antilles, the banks are not interested. Does the Solicitor-General not agree that these financial institutions should play a far greater role in trying to protect their customers?
The Solicitor-General: That is absolutely imperative. The hon. Gentleman has put his finger on an important point. The strategic authority, although it will be responsible to Ministers, will have to work—and is working—with business on all levels and across the entire range of organisations that he has mentioned.
This is about focusing on a crime that has been very dispersed and diffuse in its effects, and for which no one has taken central responsibility. Once we embarked on the consultation and began to appreciate the task that faced us, it became imperative for us to involve all the organisations in the financial sector. That is what the strategic authority intends to do. We hope that the reporting centre will work in a preventive way, by sending back packages about how to deal with the fraud that people are experiencing. It will also deter, as well as helping with investigation. Although it will not necessarily give people their money back, we hope that it will stop them losing it in the first place.
I have a little more to say, for perhaps another three or four minutes, if that is a practical proposition, about the lead force, policing and prosecution. The hon. Gentleman asked me specifically about funding in that regard. Better intelligence and knowledge of fraud can, of course, be an end in itself up to a point, but part of its purpose is to increase the risk faced by fraudsters and to target their reward.
It being Six o’clock, the motion for the Adjournment of the House lapsed, without Question put.
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