Financial Regulation: a preliminary consideration of the Government's proposals - Treasury Contents

Examination of Witnesses (Questions 512-578)

Q512  Chair: Thank you very much for coming to give evidence to us this afternoon. Can I begin with a question about your annual report? In there you say that economic crime overall, has a detection rate of 80%—78.8%. How do you know that?

Mike Bowron: Well, we know the reports we have taken, Chairman, and—as with any other crime—at the end of the year we tally up those that we've detected and those that we have been unable to detect. I think our detection rate has surpassed the 80% at the moment but it's unprecedented.

  1. Chair: Isn't this an area, though, where quite a lot of it isn't even reported?

Mike Bowron: Well, that has always been an issue as far as economic crime is concerned. We feel over the last two to three years, with the onset of what we've been doing in the Lead Force, but particularly in the National Fraud Intelligence Bureau, we are now finding more reports. People and organisations are more confident in reporting to us and, therefore, we are finding more. So I think it's more a confidence issue, in terms of what is reported to us and, with the onset of and working with the National Fraud Authority and Action Fraud, individuals are now coming to us because they have a means of reporting what they think hitherto would never have been actioned and, to a certain extent, that is true.

  1. Chair: Can you tell us a bit about the nearly 2 million people who are affected by identity fraud every year, whether that is rising or falling and whether you're confident that is the right number?

Mike Bowron: I'll pass that to Steve Head if I may. He is my Head of Economic Crime Directorate.

Steve Head: I suspect that that number is rising, sir. I think that we've just recently completed a strategic assessment on what we think the most recent threats are in relation to economic crime, and identity fraud featured largely in that. We believe that the figures are as good as they can be with the information we have available at the moment. We believe it's rising. Part of that is the rise in technology and the ability to steal identities in bulk. Technology is a great boon to us all. It certainly has also been a boon to the fraudsters.

  1. Chair: Who is winning?

Steve Head: An excellent question, sir. I would suggest that, in actual fact, in terms of the unit at the moment, we are beginning to win. That is my stance with you. We are beginning to win that war against fraud; economic crime. There is still an awful long way to go. We still experience difficulties and challenges as we go around the country. Certainly fraud is a huge international crime now. The markets that you see out there represent huge global entities. Fraudsters have mirrored that.

Mike Bowron: If I may, Chairman. Even as national lead for economic crime, my mother was subject to an identity fraud about 18 months ago. She doesn't know the full details, but two men were subsequently arrested by Cheshire Police and it seems that they were given her information by an insider in a bank, who she banked with, and they were raising funds for an organisation somewhere in Africa.

  Chair: They picked the wrong woman then.

Mike Bowron: Rather. But that is just a case in point. It can be anyone. It is very difficult to say: is it rising or are we getting better at identifying and dealing with it. We have literally millions of pieces of data in our National Fraud Intelligence Bureau, which is only 13 months old.

  1. Chair: You may feel this is not your bailiwick to answer, but I've had a number of cases in the constituency of people who have been very badly affected by identity fraud—and I'm getting nods of agreement from around the table from others—some of whom haven't been able to put their lives back together again afterwards, because the programme in place for restitution of a new identity, which is basically what we are talking about here, is still flawed. Have you anything you can say on progress in improving that?

Mike Bowron: In terms of recovering your own identity?

  Chair: Yes.

Steve Head: The National Fraud Authority has recently done a piece of work with the police's own Economic Crime Portfolio, and also at the National Fraud Intelligence Bureau, about exactly this problem. I don't believe the report that they've written is available yet. However, I've had early sight of that document and the issues that they raise are exactly those. There is, of course, the issue of preventing identity fraud but, equally, along with that is the issue of how you can assist people who have been the victims of that fraud to put their lives together again; working with credit agency organisations, and other organisations along those lines, to help people get themselves back on track because quite often, as well as the financial loss that they've incurred, there is the issue of ongoing future credit and things like that. That becomes quite an issue for them. That piece of work is ongoing and the National Fraud Authority do have documentation and plans that they're working with in the Home Office at the moment.

Mike Bowron: But if I may, Chairman, your question touches on this whole issue of victims of fraud. It was always perceived in the past—and the not too distant past—that fraud is a victimless crime. We have identified, as perhaps you saw from our briefing note, tens of thousands of victims, and we work very closely with Victim Support. So you have mass victims of, say, a Ponzi scheme. We bring them in, up to 30 or 40 or 50 at a time, and they are met by Victim Support. We get them in and we say, "You're not stupid. You're not greedy. You're just ordinary folk who have fallen victim to an organised crime group and this is what we're going to do to help you and we will all fill in statements en masse", because it is very much the same sort of questions we will ask them. That has gone down rather well and has been seen as something to be held aloft for others to follow, in terms of dealing with mass victims of any crime in actual fact.

  1. Mark Garnier: Insider dealing and market abuse: if I remember rightly, the insider dealing rules came about in the 1980s. It was a long time ago. How many instances of people being charged for insider dealing have been brought and what proportion of those has resulted in a successful prosecution?

Mike Bowron: That really isn't our bag because I think that's probably more for the FSA. We do have a MoU in the FSA and I believe we have—

  Mark Garnier: MoU?

Mike Bowron: Memorandum of Understanding.

  Mark Garnier: Right, sorry.

Mike Bowron: As we also have with OFT and the Serious Fraud Office. We work with them at their behest if they need a policing function to assist them. So if they have an insider trader they want arresting, or a group that they want arresting and bringing into custody, we will work with them to an agreed Memorandum of Understanding and provide that policing function. But in terms of that data, we're not on the regulation side and I'm unable to answer that. I think that is better addressed to the FSA themselves.

  1. Mark Garnier: I will do that when they come in. I'm rather interested, as there seems, in the last year or so, to have been a significant increase in the number of people who have been charged for insider dealing and market abuse by about 50% or so.

Mike Bowron: I can't verify those questions but there is certainly increased activity, and we know that from the work we do with the FSA. We have a very, very wrong working relationship with them.

  1. Mark Garnier: Why do you think that is, in the last year in particular?

Mike Bowron: Possibly because those relationships are better; possibly because the FSA are better at finding it; possibly because of the way the market has turned in the last year or two. People are more conscious of that line between criminal activity and—

  1. Mark Garnier: It's a very interesting thing; having worked in the City for many years, there was a great joke that used to go on that there were only 10 instances of people who had been prosecuted for insider dealing for years and years, then suddenly we start to see a big pick-up in this. The markets are a lot more complicated but, speaking as somebody who has a reasonable amount of knowledge about this, I can't quite see why the change in the market over the last year has made it easier to identify market abuse and insider dealing. It would be helpful if you could explain.

Mike Bowron: Well, as I said to you, sir, that is on the regulatory side. We are police and mainly it is organised criminality we're identifying now. We're monitoring over 600 organised crime groups, working with SOCA and other agencies, of which about 150 we're directly investigating at the moment. That's the crime side. We don't deal with regulation but we provide that policing function to the FSA, should they require it and we will work at their behest. But I don't have that data, sir, and I don't feel qualified to answer anything on insider dealing. It's not my bag.

  1. Mark Garnier: But market abuse and insider dealing are ultimately criminal charges, are they, or do I have that wrong?

Mike Bowron: They're prosecuted by the FSA.

Steve Head: They are prosecuted by the FSA generally. Obviously they are capable of criminal prosecution and the FSA bring those prosecutions under the present systems. We supply some of the investigative ability alongside it.

  1. Andrea Leadsom: I would like to talk to you about internet transactions, because there has been a huge increase in internet transactions. I gather "phishing" is the term given to trying to pretend you're a bank to get somebody to give you their bank details. Is that a growing problem?

Mike Bowron: It is indeed. I occasionally get them myself from a bank. It looks a very authentic website and I know immediately it's a phishing attack because I don't bank with them. That's a bit of a tell-tale sign. But we work very closely with the banks and with the Met e-crime Unit, which deals specifically on the technical side of the business, and other agencies. But I believe you have some data on this one, Steve?

Steve Head: Yes, thank you for a little bit of warning on the nature of the questioning there. In terms of online banking fraud losses, in fact at the moment we're seeing a little bit of a fall in terms of the first half-yearly figures. However, in terms of the general picture, that is the picture that is going up. In fact, what may be attributing to that slight dip may be some police activity. It may be that the banks have had some extreme activity, and just because the losses are dipping doesn't mean the number of attacks has dipped. So generally the trend is up, albeit in the last six months the trend is slightly dipping.

  1. Andrea Leadsom: Do you think cybercrime is a real threat to our economy? Do you have any idea of what percentage of all crimes it represents?

Mike Bowron: To put a figure on cybercrime: I think you have to separate out this term "cybercrime". There are the very technical attacks that are botnet attacks—robot network attacks, denial of services attacks—and the technical bug attacks, which are the remit of the Met PCeU or the e-crime Unit. Then there are the many frauds—advanced e-frauds, phishing attacks, lonely hearts frauds, where we've seen a massive increase lately—which have a human being on the end of them. I think we need to separate what we mean by "cybercrime".

Then there are all sorts of potential intellectual property crimes and the denials of services. The impact is enormous. If you look at South Korea, about a year ago, the whole country was primarily brought to a standstill, for about a week, from a mass and sustained attack from outside their borders on their infrastructure. So the potential is always there. We work with other agencies but we primarily focus on the fraud side—the pure fraud with a human or an organised crime group on the other end—then try and separate out the technical side for those who are better qualified to deal with that side of the business.

In terms of putting a figure on potential damage to the economy, I couldn't hazard a guess. It is only recently that we've managed to put a figure on reported fraud in this country: fiscal, non-fiscal, public, private. The last time that was done was just about a year ago, in conjunction with the National Fraud Authority and Professor Mike Levi from Cardiff University, and that was £31 billion. The last time Mike Levi did this figure—that was exactly four years ago—it was £14.9 billion. I'm not saying that fraud has doubled in that time but reported fraud had, and that could be a confidence thing as well. But £31 billion will buy you three Olympic Games every year.

  1. Andrea Leadsom: So what is the detection rate? How many of those losses are you able to recover?

Mike Bowron: We work on the "three Es principle": the first one is education. So if we go back to banking online, I use online banking but I ought to know what is a good site and what is a criminal site. But we want to educate the public and other organisations on what is a potential crime. We then work with banks and other agencies. The second E is engineering—engineering out opportunities for these things to happen. So if we can find a technical solution for people to stop putting false sites on the web we will do that. Thirdly, enforcement, because we simply don't have the numbers to deal with the crimes that are now being reported. We're currently investigating—it has just gone up—£5.3 billion worth of fraud in this country, and I've just told you that it was last assessed at £31 billion. We have picked that up in the last 18 months with a staff of about 200. So that shows you the capability that we can get our teeth into in a short timescale. But to put a whole figure on all of it, you do need academic input on this because it requires that capability.

  1. Andrea Leadsom: Yes, but how many people are you prosecuting and are you able to recover some of that money?

Mike Bowron: Yes, and our goal—certainly in the City of London Police that I am representing—is to make ourselves at least cost neutral, in terms of what we return to the public and banks and the private sector. Since Lead Force started two years ago, £168 million in pure cash has been returned to bank vaults and individuals. It is very difficult to assess that which we have disrupted, and that is a big focus: disrupting fraud. But in hard cash, £168 million. It was £117 million last year we returned to banks, which is considerably more than our force budget in its entirety. So I'm working on the force—my organisation—recovering more, freezing more, disrupting more, than it costs the taxpayer to run us.

  1. Chair: Before I pass you over to Michael, what confidence can you give us that we're not going to have a South Korean experience here?

Mike Bowron: I have the confidence that we have fantastic security services in this country, a joined-up policing approach and very good relationships between the security services and the police and other agencies. You can never say "never" but I'm confident that we are in a sound position to defend our e-borders.

Steve Head: Can I just add, sir, very quickly, on a very practical level we work very closely with the security services. The crossover between some of the things that you've seen generally around what is known as "cybercrime" and cyber-enabled fraud, as we see it, are very close, and we certainly share all of our data with those agencies that might need it in those terms. The boss is exactly right—never say "never", but we work as well as we can to recognise the threat and assist those agencies who are best positioned to deal with each particular element of the threat.

  1. Michael Fallon: Other than saying that you aim to return more than you cost, which seems fairly unsurprising, you didn't really answer the question of what the recovery rate is. Could you do that now?

Mike Bowron: Okay. The data we have, in terms of assets—

  Michael Fallon: Can you give me a percentage figure?

Mike Bowron: Well, £168 million in hard cash. We're currently investigating £5.2 billion worth of fraud, of which about £1.5 billion is attempted fraud. So it didn't realise any cash gain at all. I think the biggest one I've ever seen is US$2.25 trillion—

  Michael Fallon: That isn't the question. We're trying to measure how successful you are. What I'm looking for is some kind of measurement. What is your recovery rate on this type of fraud?

Mike Bowron: Do you mean a total figure?

  Michael Fallon: Is it 5%, 50%, 100%?

Steve Head: It's £168 million, sir, out of £5.3 billion, minus £1.5 billion. If you give me a few seconds to do the math I'll be there.

  1. Michael Fallon: That sounds very low.

Mike Bowron: But we've only been running as a Lead Force for just under two years. The Intelligence Bureau has only been running for a year. Our funding, sir, started three years ago.

Michael Fallon: All right. But you can't just defend yourself on the basis that that you return slightly more than you cost. We have to have a measure of whether you're winning or losing.

Mike Bowron: That is one of many goals. My original goal, sir, was to get fraud on the agenda.

  1. Michael Fallon: All right, it's on the agenda now. While we're waiting for the figure could you tell me something else? How safe do you think internet banking is now?

Mike Bowron: I use it, and I'm confident when I use the internet to do my own personal banking.

  1. Michael Fallon: Is it as safe as mainstream banking?

Mike Bowron: I believe so, provided we educate individuals to know what to look for as far as potential fraud is concerned. It's a confidence thing. I think internet banking is a good thing because it saves us all a great deal of time. I find it personally very convenient. I think most people do.

  Michael Fallon: I know it's convenient but that's not the question.

Mike Bowron: Of course, legitimate sites are safe, but it's not knowing if there is a crime before you and, perhaps, if you're elderly and you don't have any advice, and you're not sure what to do, you may succumb to giving or confirming your password to a criminal site.

  1. Michael Fallon: Do you think it's rational for people to be reluctant to switch to internet banking, because of the fear that their information might be passed to criminals?

Mike Bowron: I can understand why some people would be reluctant to switch, but I suppose it is incumbent on us to help to educate people to have the confidence of knowing what to look for in terms of crime.

  1. Michael Fallon: Do you think there's enough competition in the internet banking sector to force banks to invest more in their online security systems?

Mike Bowron: I don't think I can answer that one, sir.

  Michael Fallon: You don't have a view on that?

Mike Bowron: Well, I do look at the accounts of banks and I see what they invest in terms of security.

  1. Michael Fallon: Well, are they investing enough?

Mike Bowron: I don't know, sir.

  1. Michael Fallon: You don't know. Okay. Can we have the figure then?

Steve Head: I think it's about 5%.

  Michael Fallon: You're recovering 5%? Thank you very much.

Mike Bowron: But we anticipate that to increase considerably.

  Michael Fallon: I understand that.

  1. Chair: Michael Fallon's question earlier was: is it rational for people to be wary of switching to internet banking. The answer to that must lie in an assessment about whether you expose yourself to a higher risk of fraud.

Mike Bowron: Yes.


  1. Chair: Is the answer "yes" or "no" to Michael?

Mike Bowron: I suppose, logically, you are when you switch to internet banking because you're transferring your personal details over the ether.

  1. Chair: So, therefore, traditional banking is safer and we shouldn't get rid of cheques?

Mike Bowron: It's not my area, sir. I'm not a banker.


  1. Chair: Aren't these the key questions?

Mike Bowron: It does provide a source of work for us in terms crime, of that there is no doubt. There is a great deal of concern in the banking sector to get this right, because there is the potential for damage to their reputations if their sites are being copied and used by organised crime gangs. I can only say I have confidence in my own bank and I use internet banking. I opened up another account two weeks ago and I'm very confident in the system I have, but I guess I would say that because I'm a police officer and I know what to look for.

  1. Chair: Well, to respond to the question by saying, "I'm all right because I'm an expert in the field", is not just not inspiring confidence, it's telling the public that there's a very considerable risk here. Likewise, the investment levels. In your answer on that, the investment levels that the bank is putting in, surely the investment levels are themselves not particularly relevant, but what matters is the effectiveness of the tools that the investment is purchasing?

Mike Bowron: Yes.

Chair: If I may say so, on the basis of your evidence so far, you don't seem to be measuring that. Is that correct?

Steve Head: If I might, sir? In terms of the relationship that we have with the banks, they are putting considerable resources into fighting the developing issues around cybercrime—as I might call it—or cyber-enabled fraud, which is what we deal with in those sorts of issues. To answer your question, I believe that is a growing threat. That is a threat that we consider to be growing. Cyber-enabled fraud is, in my professional opinion, the largest threat that we face at the moment, because it allows the traditional frauds to happen at a far greater rate than we've previously experienced. Obviously, the banks have to also balance it against the growth that we've seen in regular insider fraud and account takeovers, which are facilitated by people within the organisations.

In terms of what you're asking around the measurement, we obviously measure our overall effectiveness in relation to the investigation of fraud. We measure it in terms of the amount of money that is stolen and how much of it we can return. We're trying to improve on that as we go, because it's important for us to get money back for the victims. We don't take any of that money. We give it back to whoever the victims are in these instances. I think the other thing I would say is that we are looking at the trends in the National Fraud Intelligence Bureau, because it is a complex picture. There are an awful lot of people interacting on these crime figures at the same time. What we're trying to do is to disseminate all of that out and show which of those have been effective in achieving the downward trend, or the upward trend, and which of them are simply just not working.

As Mr Bowron said, the unit has been up for 13 months. It's made a lot of progress in what it has been doing and it has done an awful lot in terms of identifying networks, identifying how they're linked across the country and the world. But what we haven't yet quite succeeded in doing is being able to take out those bits of our work that are completely successful, and showing what are the bits where we're maximising our impact. That is a piece of work that's ongoing. The trend that I spoke about earlier, where we've seen a dip in online banking losses, would perhaps be a good opportunity to say, "Right, there is a moment in time. What changed then?" Disseminate all of the things that are happening from the police, the banks, the public, education, the awareness and say, "What happened there that made a difference?"

  1. David Rutley: Can I just be clear about what your remit is: is it just about convicting, or is it about detection early on, or does it go back to prevention?

Mike Bowron: It is all of these things.

  David Rutley: All of those?

Mike Bowron: Yes.

  1. David Rutley: The £168 million, given the standing start, probably sounds all right, given the total scale. But obviously from your estimates it sounds like much more work is required.

Mike Bowron: Yes.

  David Rutley: Surely there needs to be a lot more work done then on the prevention side?

Mike Bowron: Yes.

  1. David Rutley: What evidence do you have of the work you've been doing on prevention, particularly working to improve standards with internet banking capability, across companies that work in the City?

Mike Bowron: Steve, do you have an example of work being done to close down banking sites?

Steve Head: We do work with the banks to close down accounts where basically what we see is victims being defrauded of their money. We don't advertise—


  1. David Rutley: Just to be clear, specific accounts such as the "David Rutley Account"?

Steve Head: Yes. If we identify suspicious activity, or the banks identify suspicious activity in relation to accounts, we do work with the banks to close down those accounts.

Mike Bowron: To prevent someone from carrying on doing that activity. That doesn't necessarily lead to a prosecution, but it will stop them from carrying on opening false accounts.

  1. David Rutley: So you do specific account-based level closures. What about when you see poor standards being implemented by a bank that could put at risk a whole cohort of customers—a group of customers? Have you taken action on that front? Any evidence of that?

Steve Head: We put out a series of alerts when we recognise any weakness in any of the systems. We put out the alerts through what is now the National Fraud Intelligence Bureau and used to be the old City operation ATFRA. We put out alerts and they're geared in two or three different ways: we will put out an alert to the banking industry where we see a weakness in a process that is being exploited. That isn't necessarily a criticism of the banking industry. It may be that it wasn't a weakness previously but it's become a weakness, because organised crime have looked at it, they've seen an opportunity and they've grabbed it. When we see that we will send that out to the banking industry and we will share that across other industries. We have also sent that out to the public in the past where, in actual fact, we try and educate the public to the issues that are being raised.

  1. David Rutley: So XYZ Bank has systems that you believe have an alert around them? Do you make that public? Do you alert people that they have an amber rating, for example, or a red rating?

Steve Head: No, we don't.

David Rutley: Should you?

Steve Head: We wouldn't rate a bank in that sense. What we would do is we would alert the bank to that process, the general banking industry to the issue and we would alert the public to a sanitised version of it, where it wouldn't be identified as a particular bank. So we wouldn't, and in the past we haven't seen that as our position to highlight individual banks in that way.

Mike Bowron: But we do share cautionary tales with banks and the insurance sector, in terms of crimes we've identified. We will share the fact that, "You need to be aware that this is how this organised crime group broke into your systems or defrauded your customers". I must say, as Chair of the ACPO Economic Crime Portfolio, in which the banks are represented as well as the insurance industry, they are much more confident among themselves in sharing those cautionary tales.

  1. David Rutley: I will come back to the cautionary tales in a minute. The other thing that concerns me is not just internet banking issues, which we've talked about, but increasingly I hear of people having their credit card cloned while they're using an ATM at a supermarket. It doesn't have anything to do with internet banking: this is just traditional banking. Somebody is cloning the card, or whatever language you use.

Mike Bowron: Or putting a device over the card reader.

  1.   David Rutley: So what is going on here? You're nodding your head. I'm sure other people have heard about these tales as well. That is traditional banking, not internet banking, where increasingly people are at risk. How big is that risk and how successful are you at tracking that one down?

Steve Head: I do have some thoughts on that, sir. We have two units that deal with that kind of criminality specifically: one of them is a City-based unit; the other is a joint City unit with the Metropolitan Police and UK Payments staff. I know that UK Payments would have the specific figures for you, but I think you'll find that they have seen a dip in that kind of criminality in this country. There have been some very significant successes in taking out the factories behind creating the mechanisms that go on the systems. In actual fact, quite a lot of those are based overseas. There was an awful lot coming from Sri Lanka for a long period. The money that was raised was going to various causes internationally, and a lot of effort was put into targeting that kind of criminality. I think UK Payments recently published something at the beginning of the year, which might give an indication as to the exact trends on that, but there is considerable work ongoing across forces.

  1. David Rutley: We know your intentions are very good and you're working very hard in this area, but you can detect some real concerns around this table about the scale of the problem that you're tackling. You talked about cautionary tales, but do you think that what you really need is more teeth to be able to tackle this problem? Do you have the power sufficient to be able tackle it properly? I don't think we're completely convinced on this side of the table.

Mike Bowron: That we have the powers?

  David Rutley: Do you have sufficient powers to tackle this?

Mike Bowron: I don't think we've ever had a shortage of powers, and we work with other agencies which have other types of powers, for example the FSA. I certainly don't want to be pushing for more resources. We have what we have and we've done what we've done in the last 18 months. We were set a task three years ago when we succeeded in a bid at the last CSR funding round to create two models, and also, at the same time, the National Fraud Authority was created to prove that this thing works. Fraud, hitherto, had only been a priority for our own force in the City of London, and at that time it was deemed to be a white collar crime. What I think we've proved in that three-year period is that it is organised crime—it's not white collar crime at all, it's organised criminal groups—and that, in a short time scale, we've managed to elevate the subject.

In a way I'm glad you are concerned because we are concerned as well. It's a drum we've been beating for years. We wanted to elevate fraud as the most likely crime that any of us would fall victim to. I probably have 40 attempts at me every year through phishing attacks and similar attacks, which we're all very conscious of and we've discussed this afternoon. It is a serious issue. Is it a question of powers or is it a question of resource? Can we justify that by making ourselves pay for the investment made in us? That's one of our goals. But I share your concerns and, once again, am pleased that you are concerned because this is what we do and we need political support and general interest in the whole subject; whether it's e-crime, banking fraud or boiler rooms or Ponzis, they come in all shapes and sizes.

  1. Chair: But what we need is more than interest—we need to know whether or not those fighting this sort of crime feel confident that they're on top of it, or not, and at the moment we're getting the message you're not confident.

Mike Bowron: I am confident the subject is now taken seriously—absolutely no question about that at all—and it is elevated up there with other serious forms of crime.


  1. Chair: Yes, we're taking it seriously now. What we want to know is: are you on top of it or not, with reducing this level of crime, or are you going to be back next year telling us that you—

Mike Bowron: Chairman, perversely, the better we get the more we find, and at some point that has to level out. As I said, if you go from £14.9 billion to £31 billion you could say, "Well, it's increasing beyond your capabilities".

  1. Chair: So most of it goes undetected?

Mike Bowron: Hitherto it probably has. But now what we are dealing with, we're detecting the vast majority.

  Chair: So this is a very worrying area, indeed.

Mike Bowron: Yes.

  1. Mr Umunna: Can I just go back to the £168 million that you said was the amount returned to individuals and corporations? I wasn't very clear: is that over two years or over three years?

Mike Bowron: The project started three years ago but the funding became available for Lead Force, effectively, two years ago. So it's really two years' worth.

  Mr Umunna: So that's two years' worth?

Mike Bowron: Yes.

  1. Mr Umunna: I think the Detective Chief Superintendent said that was about a 5% recovery rate.

Mike Bowron: Of that, which we're dealing with, yes.

  1. Mr Umunna: How does that compare with forces covering other financial centres like, say, New York, Paris or Frankfurt? How does it compare with similar units covering fraud detection in those areas?

Mike Bowron: That is interesting because I don't think there are similar units to the one we've created here. We work very closely with the FBI. I suppose they are the most similar unit in the States. We work very closely with ICE—Immigration, Customs and Excise—but there isn't a similar policing unit.

  Mr Umunna: So you're not able to compare yourselves with others?

Mike Bowron: Not really, because I don't think fraud is seen as a priority internationally.

  1. Mr Umunna: I think you cost about £100 million last year to run, as a force. Is that right?

Mike Bowron: Covering the entire police capability.

  1. Mr Umunna: You will probably detect a bit of—how can I put it?—questioning of whether you're producing value for money, given your detection rate. I mean do you think you are giving value for money?

Mike Bowron: Our detection rate is 80%, in excess of 80%, where the national crime detection rate is in the order of about 29% to 30% for all crime. It's unprecedented, in terms of overall crime figures and an 85% conviction rate. We'd like to improve that, but it's as good as it's ever been.

  1. Mr Umunna: I was quite struck by something that you said a bit earlier—and correct me if I heard this incorrectly—that you don't have the numbers to deal with the volume of crime being reported. Is that right?

Mike Bowron: As a Lead Force we give a lot of advice to other forces, because a lot of this is capable of being investigated by the other 43 forces in England and Wales and, if it is, I have agreed a doctrine with Chief Constables up and down the country that a lot of this is reported, recorded and dealt with locally. But different forces have different priorities.

  1. Mr Umunna: But do you have the capacity to deal with what is being reported to you in respect of what is happening in your area?

Mike Bowron: We have case acceptance criteria, and perhaps that is an issue for discussion as well if we're talking about Economic Crime Agency or other agencies in the future. My Head of Investigations may have something to say.

Steve Head: To answer the question directly, if we had more resources we would investigate more of the offences.

  1. Mr Umunna: Right. So you don't have enough resource at the moment to investigate all the offences?

Steve Head: We could investigate a lot more of the offences. We set a case acceptance criterion that is matched to the finite resources that we have; issues like financial investigators, and their availability within an investigation, as you can imagine. But to come back to the point that you raised, perhaps slightly earlier, in the comparison with other organisations. There are other fraud squads around the country. The detection rate for the National Lead Force is, as you've heard, the conviction rate as Mr Bowron has said. That is not replicated around the country. That is not me trying to seem—

  1. Mr Umunna: Can I just come back to this point because I don't quite feel I have got the straight answer to this? Do you have enough resources to carry out what you need to do in terms of investigating the crimes—the things that have been raised with you—or not? You've said that if you had more resources you could investigate more. But what I'm asking is: do you have enough resource to investigate what you're doing at the moment?

Steve Head: Right. Yes, I take your point, I really do, and I'm not being in any deliberately obtuse. What we do is we set the case acceptance criteria to match the resources that we have. If we had more resources we would accept more cases in relation to the work that we do.

  1. Mr Umunna: Would you like more resources?

Steve Head: I would like more resources. I'm always asking for more resources and I know that has to be balanced, as you can imagine, nationally across everybody's needs.

  1. Mr Umunna: You mentioned the national situation. 86% of your funding comes from the Home Office, and I think we're going to see a police funding cut over the next four years of about 14%. How is that going to affect you as a force? That's to the Commissioner.

Mike Bowron: I could give you an easy answer and say, "Yes, if I had double resources I could double the capability or treble the capability", but that's not the world we live in. All Chief Officers are now looking at fairly severe cuts over the next four years and some things are going to have to go; some functions are going to have to go. We don't know our future beyond April of next year. Our funding for Lead Force and the National Fraud Intelligence Bureau runs out in April 2011, and I'm told by the Home Office that we should know our fortune in the next two weeks.

We may not have this function next year—I will know in a fortnight. But we are fortunate in the City, in that this is what we specialise in doing. The whole ethos of the City is to protect the financial engine of this country, both physically and in terms of the fraud and e-crime as well. It is very difficult for me to speak for all Chief Officers. Yes, the Greater Manchester Police were talking about getting 3,000. But, yes, if I had twice the resources I'd probably be able to deal with four times more crime. We are dealing with £5 billion worth of fraud at the moment and I've already told you that, at the last count, it was a £31 billion annual problem.

  1. Mr Umunna: As a force—I used to work in the City myself, and obviously you've having to deal not only with fraud but the increased terror threat—would you be able to sustain a 14% cut in your funding, in real terms, by 2014-15 without affecting the frontline service that you're providing for your area?

Mike Bowron: We have very significant plans to cut back-office functions. It won't be of any surprise to you that we carried out a very large review of our own force a year ago. We made some savage cuts, we saved some money and we built up a modest contingency to see us through the next 18 months to 24 months. But I can only speak for my own force.

  Mr Umunna: I am only asking you about your force.

Mike Bowron: That is what I've done to mitigate the impact of the latest cuts. If the Home Office supports us in the next two weeks, in terms of continued funding for the Lead Force and the National Fraud Intelligence Bureau, I will undertake to continue and funding to 100%, because it is a function, and if I get the money for the function it will get 100% funding and support from the force. Other things may have to be cut and reduced but this subject won't be.

  1. Mr Umunna: I just want to ask the question again because I didn't get an answer to it: if you have to sustain a cut of 14%, by 2014-2015, would you be able, across the board of your force—given that you're not just dealing with fraud but protection and all the rest of it—to continue to provide frontline services to the extent that you are at the moment at the end of that period, if you're having to sustain that kind of cut and if you're asked to sustain that cut by the Home Office?

Mike Bowron: No. I've already shared with Police Authority that certain things may have to go.

  Mr Umunna: So there will be an effect on frontline services?

Mike Bowron: Yes, inevitably.

  1. Mr Mudie: So if your funding is cut, it is Mr Head's job that is on the line, possibly, in 18 months. It's not you, you will continue with your authority, I presume.

Mike Bowron: Sorry, I didn't quite understand.

  Mr Mudie: With your authority—your police authority. You will continue, but it is the work that Mr Head does that could go, depending on other people's decisions in 18 months.

Mike Bowron: We get funding from about eight different sources. So, for example, DFID fund our overseas anti-corruption unit. TfL pay for an additional body of officers for enhancing safety on the bus routes. It's not an easy answer. There's no easy answer to any of these questions. It is very complicated. If I get specific funding for a national function—whether it's the Intelligence Bureau or the National Lead Force, to assist other forces and other agencies—I will commit to whatever I can afford. It won't be his job on the line.

  1. Mr Mudie: I accept that. But your written evidence and the FSA's evidence, seemed to be slightly hostile to the Economic Crime Agency's formation. You refer to it as possibly compromising some of the work that you've done, and the FSA is stronger. Would you be recommending that the Economic Crime Agency is set up? It is a straight question.

Mike Bowron: I would certainly recommend that if it is set up I would like to work with it.

  Mr Mudie: No, that's not the question. The question is: would you be suggesting it is set up? Now, you answer with "if it's set up". The question is: do you think it's a good idea to have an Economic Crime Agency along the way it is heading?

Mike Bowron: To answer your question, sir, I haven't seen any detail of what is being proposed. My understanding—if I have this right—is it would be an amalgam of the investigatory side of the FSA, the OFT and the Serious Fraud Office. If that were the proposal—

Mr Mudie: That saves time. Fair enough, you're not saying, because you don't have enough details.

Mike Bowron: It could provide benefits in terms of smoothing out the landscape and providing common acceptance criteria.

  1. Mr Mudie: Then I will put the question to you: do you think it should be set up?

Mike Bowron: It could bring benefits, sir, in terms of certain functions, but I'm not here to speak for those organisations, sir. I can only speak for my own.

  1. Mr Mudie: All right. Just going back gently to online banking, and so on. How many prosecutions have you taken in the last three years on that line of crime?

Steve Head: We don't separate the figures out for online banking or for other kinds of offences, in terms of the figures that we've collated.

  1. Mr Mudie: Why not? I mean the Chairman and Mr Fallon have been asking you how safe it is, and whether we should already be on top of it? Can you not tell us how many prosecutions you've brought successfully? I get the impression that you've simply identified something. You mentioned Sri Lanka: "It's over there. We close it down, but over there is over there". Do you ever catch anybody for this? Have you successfully prosecuted anyone for online banking fraud?

Steve Head: Yes, sir. We have.

  1. Mr Mudie: How many in the last three years?

Steve Head: If you give me some time I will supply the panel with some details.

  Mr Mudie: You know you've done one?

Steve Head: No, we haven't—

  Mr Mudie: Well, I'm just asking you.

Steve Head: We have done them. I don't know the exact figures and to go back to the Sri Lankan issue—

  1. Mr Mudie: Well, when was your last one?

Steve Head: In terms of the last fraud that we took on—I'm not going to be drawn in terms of a time. I can get you the details.

  Mr Mudie: It is up to you. I think you have answered the question.


  1. Chair: Roughly how many? You don't know the exact number, but roughly?

Steve Head: Of the 600 investigations that we have ongoing at the moment, if you give me an hour I could get you the exact details. Lots of these investigations will be online investigations, with different kinds of cyber aspects to them.

Mike Bowron: There are jurisdictional issues here.

  Chair: We're only asking for a rough idea.

Mike Bowron: Most of the perpetrators are overseas and there are jurisdictional issues.

  1. Mr Mudie: That is what I am seeking to find out: is it simply identified where they are operating from, and if they're overseas you seek to cut it down, but that is it?

Steve Head: Can I give an example of a case we have done recently where, in actual fact, we identified that what we would call "boiler rooms" were operating from southern Spain. That is the illegal selling of shares over the internet to members of the public in this country. Now, we could have stepped in and just tried to close those down. However, we took an investigation decision. We looked into that job. We identified the organised crime group network that was operating. It was run by a gentleman—and this is potentially sub judice, in the sense that it is a matter going to court but it's our most recent case, sir—and in actual fact, the situation was they were operating out of Sweden, they were operating out of Italy and they were operating out of Spain, but they were targeting UK victims—hundreds and hundreds of UK victims.

What we did with our investigative strategy is we managed to get those parties back into the UK so they could be arrested for their part and those of them we couldn't get back into the UK, we obtained international arrest warrants to pick them up in Sweden. They were part of organised crime groups operating in this country. They were part of a different group operating in Sweden. They will be going to trial soon. That is our most recent case. There is a huge cyber element to it because it couldn't have happened without the internet, because it was happening all around the world. We also took out an international restraint order, and we have recovered hundreds of thousands of pounds of their ill-gotten gains.

  Chair: Okay. We have the general picture.

  1. John Thurso: Sorry to carry on about internet banking. Can I just follow up? You have said you are happy to bank on the internet. I'm not. I've avoided it like the plague and I'm very happy with my chequebooks, and I think there are quite a lot of people who feel the way I do. Therefore, I never suffer from any internet banking fraud because, clearly, anything I get that tells me I should bank on the internet is a load of rubbish because I don't have one.

What I think the public want to know is which is safer: the internet or traditional? Should we be getting rid of cheques? Is this precipitous? I know this is policy rather than enforcement, but if you could steer us towards an answer to that question—which is safer, the internet or traditional—I'd be very grateful.

Mike Bowron: I am personally very cautious—

  1. Chair: Is this the first time that you've thought about this question?

Mike Bowron: No, it's not, sir. It is very difficult to equate these two, because I am always very cautious when I put my card in a machine. I am looking for perhaps a false facia, for example. I nearly fell victim to one in Sevenoaks not that long ago. I saw some drilled holes, went into the bank and, in fact, it had been subject to one of these and it had been removed. It is very difficult to answer, but as technology goes on, more younger people will be coming through and using internet banking and all other forms of new technology, but new technologies provide opportunities for organised criminals. Our thrust is to work with the developers of technology and banks to stop these people exploiting those technologies to their own ends.

  1. Chair: But there is an objective answer to this question. You're an expert in it and we want your considered view.

Mike Bowron: Which is safer: internet banking or traditional banking?

  Chair: Yes.

Steve Head: I have a professional judgment, sir.

Mike Bowron: He investigates these crimes. I'm finding this a very difficult question to answer. but—

  1. John Thurso: Maybe I will be guilty of leading the witness for a moment. Would it be fair to say that today, at this moment, if you look at the relative safety of the internet versus the relative safety of traditional, traditional is safer? What you are saying is: the internet may be more convenient and, therefore, the job that is required is for those who provide internet banking to get it up to a level where it is as safe as traditional. Would that be fair?

Steve Head: In my professional judgement, it is safer to do traditional banking where you deal with people face to face. That is always going to be safer. That is not a judgement on the convenience or otherwise of how people do their banking. But in terms of the issue of safety, yes it is.

  1. John Thurso: Okay. Thanks very much for that. One other quick question, which was around the way that the Economic Crime Agency might develop, and so forth. I think the evidence was from the FSA, which was the concern that some activity is civil, and some activity is criminal. The evidence suggested that there were dangers in having two separate bodies—one focusing on the civil prosecution and the other on the criminal prosecution—and there might be duplication. This is between the CPMA and the ECA. Do you think that is a danger at all?

Mike Bowron: Mixing the civil with the criminal?

  John Thurso: Well, the fact that you will have some things that are done that would be a civil case and others that would be a criminal case, and the suggestion was that, by completely separating them between the ECA and the CPMA, there might be duplication and problems.

Mike Bowron: I suppose that could always be an issue but, as long as you have an understanding of what is criminal and what is civil, there might be benefits in having the infrastructure behind that in terms of cost benefits.

Steve Head: It hasn't been our experience in our investigations. Obviously, we do deal with the FSA when they are dealing with civil and criminal matters, and we fulfil only the sort of criminal aspects of that with them. The basis of that has to be strong MoUs, or even standard operating procedures to underpin what you do. There could be confusion, but with good processes you should be able to avoid it.

  Chair: Thank you very much for giving evidence today. You can tell that there's a great deal of concern about aspects of internet and identity fraud which you haven't, as you can also tell, fully allayed. If you have further information you think should come before the Committee please do put it in writing and we'll be very grateful to receive it.

Mike Bowron: Thank you.

  Chair: We'll be taking a three-minute break now and then resuming straight on and then the next session will finish sharp at 5.20pm.

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