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, andas with
any other crimeat 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.
- 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.
- 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.
- 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.
- 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 fraudand I'm getting nods of agreement from
around the table from otherssome 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 pastand
the not too distant pastthat 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.
- 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.
- 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.
- 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
- 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.
- 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.
- 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.
- 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 attacksrobot network attacks, denial of
services attacksand the technical bug attacks, which are
the remit of the Met PCeU or the e-crime Unit. Then there are
the many fraudsadvanced e-frauds, phishing attacks, lonely
hearts frauds, where we've seen a massive increase latelywhich
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 sidethe
pure fraud with a human or an organised crime group on the other
endthen 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 figurethat
was exactly four years agoit 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.
- 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 engineeringengineering 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
investigatingit 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.
- 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 goalcertainly in the City of London Police that
I am representingis 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 forcemy organisationrecovering
more, freezing more, disrupting more, than it costs the taxpayer
to run us.
- 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
rightnever 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- Michael Fallon: Well,
are they investing enough?
Mike Bowron: I
don't know, sir.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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 cybercrimeas I might call itor
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?"
- 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.
- 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.
- 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
- 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.
- 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 customersa 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.
- 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.
- 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.
- 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.
- 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 crimeit's
not white collar crime at all, it's organised criminal groupsand
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.
- Chair: But what we
need is more than interestwe 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 seriouslyabsolutely
no question about that at alland it is elevated up there
with other serious forms of crime.
- 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".
- 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.
- 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.
- 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.
- 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 ICEImmigration, Customs and Excisebut
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.
- 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.
- Mr Umunna: You will
probably detect a bit ofhow 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.
- Mr Umunna: I was quite
struck by something that you said a bit earlierand correct
me if I heard this incorrectlythat 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.
- 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.
- 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
- 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 crimesthe
things that have been raised with youor 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.
- 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.
- 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 yearI 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.
- Mr Umunna: As a forceI
used to work in the City myself, and obviously you've having to
deal not only with fraud but the increased terror threatwould
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.
- 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 forcegiven that you're
not just dealing with fraud but protection and all the rest of
itto 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.
- 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 authorityyour
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
functionwhether it's the Intelligence Bureau or the National
Lead Force, to assist other forces and other agenciesI
will commit to whatever I can afford. It won't be his job on the
line.
- 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 understandingif I have this rightis
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.
- 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.
- 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.
- 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.
- 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
- Mr Mudie: Well, when
was your last one?
Steve Head: In
terms of the last fraud that we took onI'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.
- 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.
- 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 gentlemanand this is potentially
sub judice, in the sense that it is a matter going to court but
it's our most recent case, sirand 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 victimshundreds 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.
- 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
questionwhich is safer, the internet or traditionalI'd
be very grateful.
Mike Bowron: I
am personally very cautious
- 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.
- 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
- 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.
- 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
bodiesone focusing on the civil prosecution and the other
on the criminal prosecutionand 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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