3Investigating fraud as a crime
79.The City of London Police are the national policing lead for economic crime. They also operate Action Fraud, which is the national reporting centre for fraud. Action Fraud send reports to the National Fraud Intelligence Bureau who then pass them to police forces.
80.The National Economic Crime Centre was launched in October 2018 and includes representatives from the City of London of Police, FCA and Home Office, amongst others. It is tasked with tackling economic crime in the “most efficient way.”94
Challenges
81.We heard a number of concerns about how law enforcement had been dealing with economic crime, and the lack of resource allocated to it.
82.Karen Baxter, the Police National Coordinator for Economic Crime, told us that in recent years the police had been operating with a reduced headcount and finances and that “fraud and economic crime has been less of a priority for policing.”95 A report published in April 2019 by Her Majesty’s Inspectorate of Constabulary and Fire and Rescue Services (HMICFRS) quoted one officer as saying “fraud does not bang, bleed, or shout”96 as an explanation as to why it is not always a high priority for police forces.
83.The Police are not the only body who undertake investigations of financial crime. Where the police are unable to investigate a fraud, other bodies may take up the investigation. Andrew Bailey, Chief Executive Officer at the FCA told us:
One of the issues that we are also facing here, […] is the lack of capacity in the broader system for tackling fraud. […] We tackle this stuff but we are not a fraud investigator per se. We are having to do a lot more of it.97
84.Peter O’Doherty, Head of Crime and Cyber at the City of London Police described the challenges faced by the police, and others when investigating economic crime:
I would say that a significant number, if not the majority, of economic crime cases are enabled by changing technology. In some cases, we are looking for a ghost. We are looking for a machine, a botnet or a DDoS [Distributed Denial of Service attack] that has committed this offence. It is how you recruit the right people into policing, with the right skills, how you keep them and how you make sure that we can match the pace at which criminals develop these capabilities. It always feels like we are behind and that is really difficult. One of the reasons why some of the cases are not investigated, whether it is a high loss or a low loss, is because the only line of inquiry we have is a website in a jurisdiction that we cannot touch or it is a piece of technology we just do not know how to get round.98
Fraud strategy
85.The City of London Police is the lead for economic crime nationwide and is responsible for prevention and investigation.99 Karen Baxter, the Police National Coordinator for Economic Crime, told us that “[T]he benefits of having a national lead force and central co-ordination is that we understand where those trends can start to emerge.”100 However the HMICFRS report appeared to question whether there was a central lead for the investigation of economic crime. It stated that:
There is no national strategy for tackling fraud. […] Police forces have therefore developed a range of different responses. We found some examples of good practice but, taken as a whole and given the scale of fraud, not enough is being done. When it exists, good practice is not always disseminated or widely adopted.101
86.As a result of its criticism of the lack of a central fraud strategy, the HMICFRS recommended that the National Economic Crime Centre (NECC) should be involved in setting a national strategy. The HMICFRS report explained that the NECC is:
A multi-agency centre [that] is expected to improve the understanding of the serious and organised economic crime threat, and plan and co-ordinate the response to the most harmful cases.102
87.Karen Baxter of the City of London Police told the Committee that the NECC “is a really good step that brings all of the assets across law enforcement together and extends that further into partnership with finance and with banking.”103
88.The Government’s Economic Crime Plan 2019–22, published during the course of this inquiry, does set a national strategy for combatting economic crime. It proposes to utilise the NECC and one of the Plan’s commitments is to “[C]ontinue to develop the NECC as a genuine public-private hub for combatting serious and organised economic crime.”104 The Plan also includes actions to be implemented by the NECC alongside other bodies which include improving the policing response to fraud,105 improving education around economic crime threats106 and improving information sharing.107
89.The announcement of a national fraud strategy is long overdue. It followed the damning criticism of Her Majesty’s Inspectorate of Constabulary and Fire and Rescue Services’ report. It must now be a priority for police forces to make the strategy work. One of the actions from the Economic Crime Plan 2019–22 is that the police response to fraud is improved. The Government should provide us with an update on this action within six-months of publication of this report.
Investigating complex fraud
90.Particularly complex frauds stretch the resources of individual police forces. As the HMICFRS report noted:
From time to time, particularly serious, large-scale frauds, often involving organised crime groups, will come to light. When such cases are not taken on by the Serious Fraud Office, it will fall to the police (or the National Crime Agency) to investigate them, or they may decide not to. We recognise that such cases can involve difficult decisions and the long-term commitment of significant resources.108
91.An example of such a case was the prosecution of the so-called HBOS Reading Fraud. This fraud involved bank staff and consultants defrauding small business owners. Following the conclusion of that case, which is currently subject to independent review, total compensation offers of more than £96m have been made to victims.109 Anthony Stansfeld, Police and Crime Commissioner, Thames Valley, noted that in that case:
It cost Thames Valley Police nearly £7m and over 3 years work to prosecute this case, only £2m of this will be recovered from the Home Office. Neither the Serious Fraud Office nor Financial Conduct Authority (FCA) has the capacity to take on major banking fraud.110
92.When we asked Karen Baxter, the Police National Coordinator for Economic Crime, how large and complex frauds should be investigated, she accepted that there had been problems in the past:
You are quite right that there were cases in the past that had moved around various organisations. The whole establishment of the National Economic Crime Centre is designed to design that out, if at all possible. There will always be a clash of agendas and cultures across organisations. What I would like to reassure the panel of is that I see less of that today. I see absolutely less of that today than I saw 15 years ago, and that is really a good, positive thing. I see an absolutely collective will to have discussions, to have multilateral work and to have bilateral work.111
Karen Baxter also provided context as to why cases may be moved around:
There is also a concern, if I am being very frank. Every force has a finite amount of resources, people and money. UK policing has a dearth of detectives. We are absent in the numbers we would like. Therefore, every force, every ROCU [Regional Organised Crime Unit] and the City of London feels that. When there is a case that comes to a particular police force, there is naturally sense of, “Is it ours or who does it belong to?” In terms of a case meeting a certain threshold, if it comes to the City of London, it will have a threshold whereby we would test whether it needs to be investigated by the City of London. Equally, if it goes to a ROCU or if it goes to the National Economic Crime Centre, is it set in absolute stone that it is ABC?.112
93.The HMICFRS report described weaknesses in how the ‘tasking’ of cases (referring cases upward) worked:
We found no formal process to request City of London Police, as the national lead force for fraud, to take on an investigation. National and regional tasking processes were generally not used for fraud so that individual forces became responsible for major cases that involved cross-border or national criminality. We were told of large-scale frauds ‘bouncing around’ between agencies with no agency taking responsibility for them.113
To deal with this, the HMICFRS recommended that:
With immediate effect, the Director General of the National Crime Agency, in consultation with the National Police Chiefs’ Council Coordinator for Economic Crime, should ensure that the tasking powers of the National Crime Agency are used effectively in the case of serious and organised fraud.114
94.Karen Baxter also emphasised that following the HBOS Reading case:
What I can give you an assurance of is that it is something that is very much to the fore of how we are working as the national lead force with colleagues across ROCUs [Regional Organised Crime Units]. There are a number of pilots that we are working with at the moment to try to pull out how we would task or how we would allocate those particular cases, and, equally as importantly, how, when those cases go out to a force and start to be investigated and it starts to become known that it is a much bigger case, we escalate those through efficiently and in a timely manner to where it needs to go. I cannot give you what I think you are looking for but I can give you the reassurance that it is absolutely at the forefront of our minds to deal with that.115
95.However, she also told us she was “ not entirely aware of” another significant and well publicised case, the so called ‘tuna bonds’ alleged $2 billion fraud, this lack of awareness perhaps itself a demonstration of the pressures on police resources.
96.Complex fraud cases have not always been effectively ‘tasked’ or referred upwards. At times they are just moved from pillar to post. This is unacceptable for the victims of potentially devastating crimes. It is therefore welcome that this is both a focus of the police, and its inspectorate.
97.Improvements to tasking will hopefully relieve some pressure on local forces. However, some cases will remain at the local level. The Government must review how it provides support to individual police forces which consider they have complex frauds they could successfully investigate, where resources may otherwise prevent those cases progressing.
Reporting
98.Action Fraud is designed to monitor the landscape of economic crime. Karen Baxter, the Police National Coordinator for Economic Crime, explained to the Committee why Action Fraud is important:
The benefit of having that central reporting system, which is very much the envy of other countries and other law enforcement, is that, while it is not perfect, it allows us to start to mine and bring all of that data together. It allows us to use the intelligence and to understand the offending types.116
99.In addition to Action Fraud, there is also a voluntary role for financial firms to play in alerting the police when they note trends or potential crimes in action. Karen Baxter said that financial firms were mainly “sharing information at the appropriate time and at the earliest opportunity”,117 but she also said this was not happening in every case, especially where the financial firm had reimbursed the consumer and did not deem the loss worth the “bureaucracy that it would take to inform [the police].”118 When asked if this information would be useful, Karen Baxter told us “Would I like them to contact us? Yes, I would. Would I like that information and intelligence? Yes, I would. Could we use that going forward? Absolutely.”119
100.We are pleased to hear that in the main, reports of economic crime from financial institutions to the police are happening in a timely manner so the police can start an investigation promptly. However, we are concerned that banks do not always appear to be reporting instances to the police where, for example, the bank has reimbursed the victim. Given the high-speed nature of the financial system, any delay in reporting to the police could prevent recovery of funds and allow fraudsters to profit at a victim’s expense. The Government should require all frauds to be reported regardless of their size, and whether or not a financial institution has reimbursed a consumer.
Action Fraud
101.We also heard evidence, that consumers were often unclear about how to report an economic crime, and/or about what Action Fraud could achieve. Richard Piggin, Head of External Affairs, Which?, told us:
Action Fraud does not have investigative powers. They collate that, which is useful to get a sense of the general trends of fraud. They might pass it on to the NFIB [National Fraud Intelligence Bureau], which might pass it back to a local police force, if there is a case for it to be investigated. Now, this takes time. It often comes back to the local police force and you will get a letter to say, “There is no viable lead of inquiry, so your case is closed.” In general, it is a very unsatisfactory experience.120
102.Action Fraud has recently been the subject of media investigations which focused on the working practices of staff121 and what happens to information provided to Action Fraud.122 These reports suggested that significant improvements were needed by Action Fraud to ensure staff consistently treat victims with sympathy and were being clear to victims as to how the information will be used. Yvette Cooper, Chair of the Home Affairs Committee said that “Action Fraud has become a means to divert and fob off victims of crime.”123
103.Concerns were also raised about Action Fraud in the HMICFRS report. Amongst them, it noted that:
The 2006 Fraud Review stated that it was confusing for victims to know where to report fraud and recommended that a national fraud reporting centre should be established. Thirteen years later, confusion still exists. The Office for National Statistics identified in 2018 that the main reason for not reporting fraud was “a lack of awareness of Action Fraud”.124
The HMICFRS report also raised concerns about how calls were being handled:
The average call abandonment rate for Action Fraud for the 12 months to March 2018 was 37 percent. This was an increase on the previous year’s figure of 34 percent. Average call waiting time in March 2018 was 16 minutes, having increased over the previous two years.125
104.Given its concerns, the HMICFRS report, recommended that:
By 30 September 2019, the National Police Chiefs’ Council Coordinator for Economic Crime should provide guidance to Action Fraud and chief constables. This is to ensure that, promptly on reporting a fraud, victims are provided with explanations of:
- the role of Action Fraud;
- the process by which their fraud report will be considered for assessment or referral to the police (or other law enforcement agency) by the National Fraud Intelligence Bureau;how to obtain an update on the progress of their case;
- how, following referral from the National Fraud Intelligence Bureau, the decision on whether and how to investigate rests with the police (or other law enforcement agency); and
- the options open to victims of fraud to seek civil redress as an alternative (in cases where criminal investigations are not carried out or do not lead to convictions).126
105.It is not currently always clear to consumers whether a fraud should be reported to an individual consumer’s bank, the police or to Action Fraud, nor is it always clear what each entity would do with the information provided. The process for reporting an economic crime needs to be clarified. We welcome the plans to issue guidance to Action Fraud and chief constables to ensure consumers reporting a crime are clearly told both how reported instances of fraud will be used, and also how they won’t be used, when they report a crime.
106.The serious criticism of Action Fraud in the ‘Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services’ report and in the media need to be addressed. In its response to this report the Government should set out what it has done to address this issue.
94 National Economic Crime, Improving the UK’s response to economic crime, accessed 15 October 2019
96 Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services, Fraud: Time to Choose, April 2019, p5
97 Treasury Committee, Oral evidence: Independent Review of the Financial Ombudsman Service, HC1400, 22 January 2019, Q499
99 City of London Police, Advice and support, accessed June 2019
101 Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services, Fraud: Time to Choose, April 2019, p7
102 Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services, Fraud: Time to Choose, April 2019, p17
104 HM Government, Economic Crime Plan 2019–22, July 2019, p19, point 20
105 HM Government, Economic Crime Plan 2019–22, July 2019, p39, point 5.7
106 HM Government, Economic Crime Plan 2019–22 July 2019, p48, point 6.8
107 HM Government, Economic Crime Plan 2019–22, July 2019, p62, Action 46
108 Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services, Fraud: Time to Choose, April 2019, para 5.73
109 Lloyds Banking Group, Lloyds Banking Group announces the conclusion of HBOS Reading customer review by Professor Griggs, 7 May 2019
110 Police and Crime Commissioner Thames Valley, Statement from the Police and Crime Commissioner - Fraud, 19 January 2018
113 Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services, Fraud: Time to Choose, April 2019, p17
114 Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services, Fraud: Time to Choose, April 2019, p75
121 The Times, Action Fraud investigation: victims misled and mocked as police fail to investigate, published 15 August 2019
122 Which? Magazine, Why the system is failing scam victims, October 2019
123 The Times, Action Fraud investigation: victims misled and mocked as police fail to investigate, published 15 August 2019
124 Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services, Fraud: Time to Choose, April 2019, p18
125 Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services, Fraud: Time to Choose, April 2019, p18
126 Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services, Fraud: Time to Choose, April 2019, p25
Published: 1 November 2019