1 Introduction and Government commitments to tackle fraud
1. Fraud is defined by the Crown Prosecution Service (CPS) as “the act of gaining a dishonest advantage, often financial, over another person”.1 Our inquiry looked at the increasing instances of fraud crimes and how the criminal justice system and wider government response is set up to tackle these offences. We focused predominantly on how the system is set up to tackle lower-level frauds, which have a significant impact on the public, businesses, and the UK economy.
2. The importance of tacking fraud has been highlighted repeatedly by the Government over the past few years. In its 2021 Economic Crime Plan Statement of Progress, the Government articulated how “fraud poses a direct threat to the UK’s post-Covid economic recovery, eroding consumer confidence and costing individuals and businesses billions each year.”2
Recent trends in the level of fraud crimes
3. Fraud has become the most commonly experienced crime in England and Wales, now accounting for more than 40% of all recorded crime. This has been facilitated by increases in cyber-crime, with the Office for National Statistics (ONS) estimating that approximately 53% of all fraud is now online enabled.3 875,622 frauds were reported through Action Fraud, Cifas and UK Finance in 2020–21.4However, it is widely considered that these reported crimes are just the tip of the iceberg, with the ONS estimating that more than 4.6 million fraud offences take place in England and Wales each year.5
4. Fraud is the type of crime most likely to be experienced by a member of the British public. According to Citizens Advice, more than three quarters of UK adults surveyed reported having been targeted by a scammer in 2022, with many companies also suffering financial losses through being targeted by frauds and scams.6
5. The already growing number of fraud crimes increased during the Covid-19 pandemic, as more people spent a greater proportion of their time online where many scams are perpetrated. For example, when compared with the year ending June 2020, Action Fraud reported a 27% increase in fraud offences for the year ended June 2021.7 It was emphasised to us that the volume of crimes had been “climbing year on year for four or five years”, and therefore as the country emerges from the pandemic there is no suggestion that the volume of crimes will drop.8 The ONS’s recorded crime statistics for England and Wales show the recorded growth trajectory of fraud cases in recent years:
Chart: Number of fraud incidents reported to Action Fraud, Cifas and UK Finance (‘000)
Source text: Figures from Table A5 in September publications of ONS, Crime in England and Wales - 2016-2021
6. Estimating the potential future growth in fraud crimes, Temporary Commander Clinton Blackburn of the City of London Police told us that “if there is no intervention, we reckon that by 2025 we will be looking potentially at another 25% growth in what is coming at us.”9 This estimated growth level would push the total reported crimes received through Action Fraud, Cifas, and UK Finance in a single year to over 1 million, and reported crimes only represent a small proportion of the level of fraud being conducted on the public.
7. These crimes have a significant financial impact not only on individuals but the overall economy. It is estimated that fraud costs society at least £4.7 billion each year,10 with organisations being targets of fraud alongside individuals; and companies, particularly the banking sector, losing funds through compensating clients for losses incurred.
8. The volume of fraud crimes poses operational difficulties for the criminal justice system.11 A 2019 inspection of the police response to fraud found that the scale of fraud crimes far outstrips the resources allocated to it.12 The then Victims’ Commissioner, Dame Vera Baird KC, outlined to us her belief that fraud “is under-reported, under-prioritised and under-investigated”.13
9. There is currently an epidemic of fraud in England and Wales. The level of fraud has been increasing year on year and this growth accelerated during the pandemic to an unprecedented level. As the country emerges from the Covid-19 pandemic, there are no signs of a reversal in the upward trend.
The changing nature of fraud crimes
10. The threat of fraud is constantly evolving. Criminals are quick to adapt their methods to exploit weaknesses in new systems or technologies. Any response therefore needs to be agile in order to respond to the varying ways of perpetrating fraud. We heard of the impact that the use of online technologies has had on how fraud is carried out not only in this country but across the world.14 The Covid-19 pandemic saw a societal shift towards increasing reliance on technology and time spent online. We were told that this is being exploited by criminals, who increasingly use digital platforms as the base from which to perpetrate their crimes. Technology enables fraud to be committed at scale with ease, speed, and anonymity.15 Mark Steward of the Financial Conduct Authority (FCA) reflected on the proliferation of digital techniques for perpetrating fraud, calling this the “single biggest change in the shape of fraud we have seen”, with this being a global issue and a “new and very difficult” phenomenon to deal with.16
11. The Government’s written evidence to us reflected on how evolving technology has allowed fraud to become “an increasingly borderless crime”, with more opportunities for UK nationals to be targeted from overseas.17 According to the National Fraud Intelligence Bureau, approximately 75% of the fraud crimes prosecuted by the CPS have an international element, with 30% of the crimes committed taking place primarily overseas.18 The Crown Prosecution Service (CPS) reflected on the changing nature of the fraud threat and the ability of criminals to quickly adapt to these changes:
The economic crime threat is continuously growing and evolving, with criminal networks becoming increasingly resilient and adaptable, quickly exploiting advances in technologies, services, and products, such as cryptocurrency, and thereby being able to cooperate across multiple jurisdictions.19
12. As the ways in which frauds are being perpetrated change, making increased use of the online sphere and new technologies, the enforcement and prosecution of these crimes also needs to adapt to keep pace with the crimes being conducted.
Government ambitions and accountability
13. Tackling fraud is a stated priority for the Government. The Home Office’s 2021 Beating Crime Plan set out the Government’s intention to tackle fraud and reduce the harm these crimes cause.20 It states that “the threat posed by fraud to our economy and the public is one we are determined to address, working with the public and industry to prevent the crime and by disrupting, pursuing and bringing to justice the most harmful.”21 In October 2021 the Home Secretary announced the relaunch of the Joint Fraud Taskforce, with the joint aims of reducing the growing threat of fraud and protecting the public. A new Fraud Action Plan is expected later in 2022.
14. The Government has committed £400 million to tackle economic crime over the next three years. Of this settlement, £103 million will be dedicated specifically to the response to fraud, with money going towards the replacement of Action Fraud and funding additional investigators for fraud teams.22
15. Our inquiry has heard that some people feel that the Government’s commitments to tackle fraud are not sufficient to meet the growing volume of crime. The then Victims’ Commissioner told us that she believes there is a lack of ambition in the Government’s approach to fraud caused primarily by difficulties posed by the volume of fraud:
I have a concern that there is a sense of hopelessness across the system because the scale of the fraud problem is so big, investigation is complex and the responsibilities for a crime that is now largely digital media driven doesn’t fit neatly into the real world, or within discrete police force or even national borders.23
16. The current approach to fraud has been described to us as disjointed and lacking in an overarching strategy to prevent, investigate, and prosecute these crimes.24 The importance of a whole system approach to fraud and other economic crime was highlighted in the Association of British Insurers’ written evidence to the inquiry which outlined that there needs to be a united response to fraud and cyber-crimes across the criminal justice system and government as a whole.25 A frequent criticism raised in our inquiry was that the resources invested in tackling fraud are far from sufficient to deal with the scale of fraud crimes. One articulation of this was provided by the Bar Council, who outlined that:
A fundamental issue which is a blight on the entire criminal justice system is the lack of state resources directed to the investigation and prosecution of crime.26
17. Other submissions to our inquiry argued that it is not merely a lack of resources that is hampering the Government’s response to fraud, but also an overall lack of recognition of the threat posed by fraud and ambition to tackle it. In his written submission, Adrian Darbishire KC argued that the problem is not merely one of resources, but also “a deep-seated refusal to face the problem; to recognise frankly its extent and its attendant harms; and then to think through, realistically and boldly, the measures needed to address it”.27
18. The primary responsibility for fraud sits with the Home Office’s Minister for Security and Borders, with elements of fraud crimes also being within the remit of HM Treasury and the Department for Work and Pensions. The Ministry of Justice is responsible for the legislative framework within which fraud is prosecuted. There is ministerial-level governance for the Government’s response to fraud in the form of both the economic crime strategic board, and an economic crime delivery board which are chaired jointly by the Permanent Secretary of the Home Office and the Permanent Secretary of HM Treasury.28
19. We heard from witnesses that it is unclear to the public who currently has responsibility for the governmental response to fraud, and where this responsibility should lie.29 Additionally, we heard that the then Minister, Damian Hinds (succeeded by Stephen McPartland and then Tom Tugendhat), had numerous other responsibilities within his portfolio. Katy Worobec, Managing Director, Economic Fraud, UK Finance (a trade association for the UK banking and finance sector), highlighted to us the need for a dedicated minister to bring about a significant shift in the response to fraud, outlining that:
Fraud is such a huge problem that it would seem helpful to have a Minister for fraud who would draw together not only other sectors but all the different parts of Government that have skin in the game in dealing with fraud issues.30
20. Fraud is a growing issue and one which does not sit naturally with the other elements of the Minister for Security and Borders extensive portfolio. Fraud and other forms of economic crime need to sit within a Ministerial portfolio that allows the postholder to prioritise this increasingly important area of work, and who can draw together parts of government and private sector companies to create a unified approach to tackling fraud. This should also be in such a way as will give the issue more publicly visible political and governmental ownership and accountability.
2 Victims
Impact on victims
21. Our inquiry heard that there can be a “perception that fraud is not a high threat, risk or harm case when compared to a serious sexual assault or a significant assault.”31 Fraud is far from being the victimless crime it is often portrayed as. The most easily identifiable impact of fraud on a victim is the initial financial loss. Victim Support have identified that the financial cost of fraud to an individual can vary widely, from individuals losing less than £100 to amounts “so severe that they became bankrupt, were made homeless, had to sell their home or business, had to postpone retirement or return to work after retiring, or had to move in with other family members”.32
22. However, the impacts of fraud often go beyond financial loss, causing psychological and emotional distress to victims. Consumer organisation Which? has reported that 300–350 people a week were victims of a fraud that left them in severe emotional distress.33 The number of victims experiencing significant harms as a result of fraud is growing as the volume of fraud crime increases. For example, in 2020/21, fraud referrals for specialist support received by Victim Support increased by 59% when compared to the previous year.34
23. Anyone can fall victim to fraud. It is a crime that affects all ages;35 while traditionally it has been reported that older people have been the main targets of fraudsters, perhaps because of a perception that they have more money to be misappropriated,36 our inquiry heard of the growing targeting of younger demographics who spend proportionally more time online and may be less aware of some of the risks involved, particularly surrounding new products such as crypto assets.37
24. Although anyone can fall victim to a fraud, these crimes do not impact victims evenly. This was illustrated in the then Victims’ Commissioner’s Who Suffers Fraud? report, which found that “Fraud spans a very wide scale of severity and harm caused, from a minor inconvenience to the loss of life savings and a sense of profound humiliation at being used by criminals in this way.”38 This research found that around half of fraud victims are not particularly affected by the crime, often because they did not actually part with money when faced with an attempt to defraud them or had their money quickly reimbursed. However, for nearly a quarter of victims, the impact of fraud was profound. These severe impacts were often seen in groups of vulnerable, isolated, and older victims, who disproportionately fall prey to more serious frauds such as romance and investment frauds, although severe impacts were also noted from more commonplace scams.
25. Wayne Stevens, National Fraud Lead at Victim Support, told us of the importance of organisations which are contacted by victims of fraud, such as Action Fraud, being able to consider the impact on the individual rather than relying on preconceived notions of who may be vulnerable. As he outlined, people can be particularly affected because of other circumstances in their lives that make the impact of the fraud far more profound than the value of the money lost.39
26. Victim support services are stretched and do not have the capacity to manage the millions of victims of fraud each year. As Mike Haley from Cifas told us, it is therefore vital that efforts are focused on those who need support most. However, distinguishing these individuals from those who are relatively unaffected by the crime they have suffered is a challenge for services responding to victims of crime.40
27. Fraud crimes do not impact victims equally and due to limitations in victim support capacity, efforts to support victims of fraud should be focused on those who need it most. It is therefore vital that responders to these crimes have the training and experience required to identify who may need further support and can direct them to services which can provide this aid.
Victim support
28. Mike Haley from Cifas told us that while there is some good practice in victim support, there is currently a patchy and inconsistent approach to supporting victims.41 He suggested that a solution to the current varying picture of victim support would be to introduce a “national standard for victim care” to clearly set out what services a victim should be entitled to no matter which part of the country they are in.42
29. The West Midlands Police and Crime Commissioner highlighted a lack of victim input in the current system, causing issues in the provision of appropriate victim support:
The current system also lacks a victim voice, and because of this, victims are not provided with the support they actually need, either because support provided is inconsistent and confusing or because it does not have what victims actually need - increasing the likelihood of re-victimisation43.
30. The Government’s 2019 update on their Economic Crime Plan committed to having all 43 police forces in England and Wales working with victim care units by the end of 2021, recognising the importance of improving the support offered to victims of fraud.44 Victim care units provide practical and emotional support to victims of crime, supporting them throughout the criminal justice process. As of April 2022, 37 of 43 forces were working with victim care units. Our inquiry heard that discussions are ongoing to bring the remaining police forces on board. However the Government was unable to set a date by which all forces will be working with victim care units to boost support for victims of crime.45
31. Support available for victims of fraud is patchy and inconsistent. Thirty-seven police forces currently work with victim care units. However this is not compulsory and there is currently no national standard for fraud victim care. The Government should set a minimum standard of care that a victim of fraud can expect to receive when reporting a crime and ensure that all 43 police forces in England and Wales are working with victim care units to provide victims with effective support by the end of 2023.
Reporting mechanisms for fraud
32. Fraud is unique from other crimes in its specific pathways for reporting and investigation, involving not only the police but also Action Fraud, the centralised reporting centre for fraud and cybercrime, and industry bodies such as Cifas and UK Finance.
33. Our inquiry has heard that this unique but opaque reporting mechanism means that victims often do not know who is best placed to provide help or are referred to multiple agencies and services to report crimes and get support. The then Victims’ Commissioner spoke of the situation as “a sort of alphabet soup, you have to work out to whom you should be complaining”.46
34. Action Fraud was established following the Attorney General’s Review of Fraud in 2006 which identified a need for a single point of contact for victims and a mechanism to allocate this cross-border crime across police forces. Action Fraud is the national reporting centre for fraud and cyber-crime where people should report crimes where they have been scammed or defrauded. Fraud incidents reported to Action Fraud are analysed by the National Fraud Intelligence Bureau to identify information that could assist investigation and identify links between incidents, before deciding which reports have enough information to warrant investigation.
35. Only 5% of the general population surveyed by Citizens Advice in 2021 knew what Action Fraud was. Indeed, many victims instead turn to the traditional route of reporting the crime directly to the police. These victims may get redirected to Action Fraud, or the crime may get recorded directly by the police.47 Written evidence to us from local police forces suggested that while the police are trained to redirect victims to Action Fraud in order to report a fraud, they have found that the most vulnerable victims are often unable or unwilling to do this.48
36. Due to the lack of awareness of Action Fraud and the negative commentary on the service victims have received when reporting crimes, only a small proportion of frauds that occur are reported. The West Midlands Police and Crime Commissioner highlighted concerns that a lack of reporting of fraud crimes leads to only a small number of incidents filtering down to the police for investigation.49
37. Many victims of fraud find it difficult to know how to report the crime. It needs to be made much clearer to victims how they can report a crime, as the current lack of clarity brings added distress to the process. We acknowledge that increasing awareness of Action Fraud will place increased pressure on the already stretched reporting service, but it is vital that victims feel able to report their crimes both for the individual to feel that they are being listened to, and also to help build a national picture of fraud crimes. The Government should increase efforts in advertising Action Fraud to raise public awareness of how to report incidents of fraud.
Action Fraud
38. Action Fraud has been subject to extensive criticism since its inception. A 2021 review of the policing response to fraud conducted by Her Majesty’s Inspectorate of Constabulary and Fire & Rescue Services (HMICFRS) concluded that:
Many victims are not given enough information about how (or whether) their case will be investigated. The length of time people have to wait for their call to be picked up by Action Fraud, and the number of people who hang up before they are answered, are still unacceptably high.50
39. We heard evidence that there is a lack of empathy for victims within the reporting centre and no provision made for providing information such as steps to take to help avoid being a repeat victim of fraud or direction to support services.51 Victims rarely receive updates on what is being done with their reports, and many constituents report to their MP that it is a “bit like a bottomless pit”,52 with no information provided as to the next steps being taken in relation to the crime.
40. Despite its flaws, our inquiry heard from police working on fraud that Action Fraud plays a vital role within the fraud landscape as local police forces would crumble under the volume of reports if they were all reported directly to the police. The importance of a centralised reporting centre was also emphasised by Mike Haley of Cifas, who told us of the need to have information gathered centrally as frauds are dispersed across the country and therefore ‘packages of intelligence’ can be put together from multiple calls in order to create a more detailed image of a crime than could be gathered from a single incident.53
41. There are 95 staff in the Action Fraud call centre, a staffing level which has increased by 20 individuals over the past year.54 In 2020/21, Action Fraud received 413,945 reports of fraud.55 Based on this volume of crime and current staffing levels, in a year each member of staff within Action Fraud is expected to record and manage 4,357 cases. As a comparison, at any one time the entire of City of London Police has around 400 live fraud investigations.56 The volume of reports an individual member of staff is expected to deal with in Action Fraud clearly makes it difficult to provide a high-quality service to each individual victim reporting their crime.
42. Individual police forces do not have the capacity to manage the volume of fraud reports made and so it is vital that there is an effective reporting service that is victim-focused and can deal consistently with reports and progress cases swiftly to a resolution, all while keeping the victim updated on the actions being taken. Action Fraud has not proved itself to be fit for these purposes and is not sufficiently resourced to meet the growing and varied challenges of fraud. Action Fraud is due to be replaced in 2024; however, victims should not have to wait until then before they begin to see an improvement to the mechanisms for reporting fraud and monitoring the progress of their cases. The Government should take steps now to address these issues.
43. Although the level of staffing at Action Fraud’s reporting call centre has increased from 75 to 95, this is clearly not sufficient to provide an adequate service to all those reporting a fraud. Sufficient staffing needs to be put in place to ensure Action Fraud and its successor service can provide a high-quality service to victims, keeping them updated on the progress of their case and directing them to appropriate support services where required.
Replacing Action Fraud
44. The Government is replacing Action Fraud with a new national fraud and cybercrime reporting system, due for completion in 2024. The Government has said this replacement will be “a more efficient new system that will provide better intelligence to forces”.57 In his evidence to us, the then Minister for Security and Borders outlined the anticipated changes to the reporting service:
The system needs complete replacement—a lot of this is about systems—to make sure that information on crimes committed can be processed quickly and efficiently and disseminated, and to make the joins so that when different people are reporting different incidents we make the joins and work together.58
45. We were told that the focus of the replacement of Action Fraud will be on the IT system that underpins the service, improving the call centre technology and the analytical software that is used to gather reports and consider potential leads and links between crimes. There will also be an uplift in staffing to provide better customer service.59
46. Ahead of the replacement service, £25 million has been committed to support Action Fraud and improved intelligence gathering in the National Economic Crime Centre.60 We were told that Action Fraud is improving its victim support facility, improving the consumer interface, and automating some elements of reporting.61
47. Dame Vera Baird KC, the then Victims’ Commissioner, outlined to us the key features a new reporting service needs to have to ensure a good quality of service is provided to victims of fraud62:
It should have qualified first responders who know how to assess needs, vulnerability, repeat, all of that, and how to pass on to appropriate victims’ resources if that is what is needed, which is pretty patchily achieved now. Then it needs to have plenty of information coming out, like the pathways and what will happen, and make sure that fraud victims, like everybody else, get all of their code rights as it goes along. It needs to be a properly, well-established victim support-type organisation, but with a specialism about fraud.
48. We welcome the Government’s plans to replace Action Fraud with a new service in 2024; however, we understand from the Government’s evidence to our inquiry that the planned changes are focused on the technology underpinning the service, primarily improving the analytical tools applied when a crime is reported rather than improving customer experience. While this is an important development, changes to the service also clearly need to bring about improvements in the victim’s experience of reporting a fraud crime.
49. While we welcome the Government’s commitment to replace Action Fraud with a new service better able to record and disseminate information about a crime, the service also needs to focus on victim experience, ensuring there are trained individuals staffing Action Fraud’s successor who can assess the needs and vulnerabilities of victims and direct them to appropriate resources.
Compensation
50. As discussed earlier in this chapter, fraud can have impacts that reach far beyond financial losses; however, financial impacts remain central to these crimes. In 2020/21, Action Fraud estimated that £2.35bn had been lost as a result of fraud over the year.63
51. We heard suggestions for practical solutions that could be taken to aid victim compensation. Gregor McGill of the CPS highlighted that introducing flexibility in amending the value of a court compensation order could lead to victims gaining greater compensation if those charged with a crime are found to have more significant assets after the order is passed. This flexibility is already in place for amending confiscation orders to allow for increased asset recovery; however, due to current legislation this cannot be passed on as compensation to victims.64
52. The Government should introduce changes to compensation order legislation to allow for flexibility in altering the order value if a criminal is later found to have assets of greater value which can be used to compensate victims of their crimes. This would bring practice into line with that already in place for the amendment of confiscation orders to allow for increased asset recovery.
53. In our discussions with police working within fraud, it was highlighted that for some cases police time may be better spent trying to confiscate assets obtained through fraud crimes—for example, items paid for with money taken from victims—in order to maximise the compensation of victims rather than focussing on getting a case ready for prosecution. The Serious Fraud Office spoke to us about the work it does to try and restrain assets at the earliest opportunity to maximise the amount available to compensate victims of frauds perpetrated. These processes are currently not widely adopted in the lower-level frauds investigated by the police and prosecuted by the CPS. The SFO outlined their approach in their written evidence to us:
While many fraudsters will spend a proportion of their proceeds of crime before the funds can be restrained/frozen—and unfortunately it is therefore unlikely that victims will receive compensation equal to their losses—the SFO aims to restrain or freeze the proceeds of crime at the earliest possible stage of a case to reduce this risk as far as possible.65
54. Scam victims are increasingly being reimbursed by relevant financial institutions. Some industries run their own initiatives to help victims of fraud: for example the Gambling Commission maintains a pot of funds to use as victim compensation when misappropriated assets have been lost through gambling. Banks are encouraged to voluntarily reimburse victims of authorised push payment scams, with the Government committing to introduce legislation to give the Payment Systems Regulator power to order this reimbursement. However, although these schemes help the initial victims of the fraud, they lead to losses being absorbed by banking institutions and other businesses at an overall cost to the economy. As profit-making organisations, when institutions reimburse following fraud, costs are indirectly carried by their customers and the overall economy.
55. In addition to considering mandating the reimbursement of victims of push payment scams, the 2019 Statement of Progress on the Economic Crime Plan stated that the Home Office was working with law enforcement agencies and banks to explore a series of pilots to look at how funds held in suspended accounts might be used to compensate fraud victims. Details of these pilots have not yet been made public.66
56. Schemes to boost the compensation of victims are of course of benefit to victims; however, it has been emphasised in our inquiry that improving the compensation of victims will not solve the epidemic scale of fraud, nor will it prevent the non-financial impacts on those who fall victim to these crimes. As Katy Worobec of UK Finance outlined:
We need to address the problem of tackling the fraud, not the reimbursement. If you think about the problem, we could reimburse 100% of customers, but fraudsters would still be getting the money.67
57. We are wary of placing too great an emphasis on the compensation of victims. We do not want to give criminals carte blanche to commit their crimes just because victims can be reimbursed, since their crimes will continue to have a significant financial impact on the UK economy, as well as millions of banking customers, even if these losses are not borne by the defrauded individuals directly. The main focus should be on ensuring these crimes are prevented where possible; however, maximising the recovery of assets for victim compensation should be a priority for investigatory bodies once they become aware of a crime having taken place.
3 Investigating Fraud
Policing structure
58. Although many frauds are investigated at a local level, there is a centralised structure that has been developed to improve the response to fraud. The City of London Police is the National Police Chiefs’ Council Lead for Economic and Cyber Crime and National Lead Force for Fraud. They operate Action Fraud and the National Fraud Intelligence Bureau, which is the analysis centre for fraud and cyber-crime that sits behind Action Fraud. The City of London Police also provide training and continuous professional development for the police and private sector workforces through its Economic Crime Academy. In 2021, City of London Police fraud investigations resulted in 210 arrests, 178 charges and 152 convictions. At any one time the force has over 400 live fraud investigations ongoing.68
59. Working with City of London Police and local forces is the National Economic Crime Centre (NECC), which sits within the National Crime Agency (NCA). The NECC was established in 2018 and brings together law enforcement, justice agencies, government departments, regulatory bodies, and the private sector with a shared objective of driving down serious organised crime, protecting the public and safeguarding the prosperity and reputation of the UK as a financial centre.
60. The NECC is responsible for coordinating and tasking the UK’s response to economic crime, harnessing intelligence and capabilities from across the public and private sectors to tackle economic crime in the most effective way. The NECC collaborates with not only the police but also the Financial Conduct Authority, Her Majesty’s Revenue and Customs, the Crown Prosecution Service, and the Serious Fraud Office to co-ordinate the operational response to fraud.69
61. It can be difficult for local police forces to know where the chain of command and responsibility sits for fraud causes. Mark Shelford of the Association of Police and Crime Commissioners outlined that:
For a lot of county police forces the issue is understanding co-ordination between what is local and regional and what is national and international, and the part that they and all the different agencies nationally with a foot in this have to play.70
62. We have heard calls for a collaboration agreement to be in place between City of London Police and other police forces, from the West Midlands Police and Crime Commissioner.71 It has been suggested that such an agreement would help outline responsibilities and expectations when it comes to approaching fraud cases.72
63. Within policing, there are various chains of command when it comes to tackling fraud cases, with investigations being conducted at a local level but with central bodies, namely the City of London Police and the National Economic Crime Centre, having responsibility for the overall approach to combatting fraud. This can create confusion and lead to the passing of responsibility for fraud cases between forces and other police organisations.
64. The Government should ensure agreements are in place between the City of London Police, the National Economic Crime Centre, and local police forces to outline responsibilities in relation to fraud and also highlight the support available to local forces working within fraud from centralised bodies.
Investigation of frauds
65. Frauds are primarily investigated by regional police forces as a result of information disseminated to them from reports made to Action Fraud or from centralised bodies. The most serious and complex cases can be investigated by the Serious Fraud Office, which also has the power to initiate investigations, although the volume of cases taken on by the SFO is very small, with the organisation having around 60 live cases at any one time.73
66. Only a small percentage of frauds are subject to police investigation. Of the more than 800,000 frauds reported to Action Fraud, Cifas, and UK Finance in 2020/21, only 58,210 were disseminated for further investigation.74 The Government’s written evidence to our inquiry acknowledged that there is a lack of investigation of fraud in the system, recognising the need to increase the pipeline of cases under investigation in order to increase prosecution outcomes for fraud crimes.75
67. A key issue in the investigation of frauds is that unlike other crime types, such as burglary, the perpetrator is often not in the same geographic location as the victim. The impact of this on investigation was outlined in the Chief Inspector of Devon and Cornwall Police’s written evidence to the inquiry; he reported that many crime investigations were closed simply because the suspects were believed to live outside of the force’s geographical boundaries, or outside of the UK, and therefore did not take priority when compared to crimes being perpetrated in the force’s locality.76
68. Evidence from police forces highlighted that fraud investigations are mainly reactive and focused on cases which are perceived as ‘low-hanging fruit’ instead of more complex crimes which may exploit new technologies or are based across several locations.77 Mark Steward of the FCA told us that investigations often only start after a victim has realised that they have been a victim of fraud, which can be long after the fraud has been perpetrated, with this delay making investigation and disruption of further crimes more difficult.78
69. We heard from Rob Jones, Interim Director General of the NECC, that within the investigatory response they are looking to shift the focus to tackling fraud crimes while they are in action, rather than dealing with the consequences. He told us of a desire to “act much more quickly before money has been transferred and before a victim has been victimised”.79 There are ambitions for Action Fraud’s replacement to play a key role in increasing prevention work, aiding “intelligence-led interventions”.80
Prioritisation
70. Unlike other crime types, fraud statistics are not reported on a regional basis. Instead, they are centrally collated by Action Fraud, meaning a comparison between different forces’ performance is not possible. As a result, it is more difficult to hold forces to account on their performance on fraud than it is for other crime types. The Ministry of Justice has developed new Criminal Justice dashboards which allow for comparisons across various metrics between forces to consider their performance. Due to fraud being excluded from the data collected, meaningful information cannot be gathered from these new dashboards in the way that it can be for other crime types and forces cannot be compared on their investigative outcomes for fraud. We were told that this lack of data interrogation leads to an impression that frauds appear “to be treated as lesser offences” than crimes which are routinely monitored.81
71. HMICFRS’s 2019 report into the police response to fraud found that “the investigation and prevention of fraud offences by police forces remain under-resourced and are not given enough priority.”82 This view was repeatedly echoed in the responses to our inquiry, with many believing that as forces are not held accountable for their performance on fraud it does not receive a sufficient allocation of resource and is not treated as an investigative priority.83
72. We heard evidence that in order for fraud to be treated as an investigative priority, police forces need to be held accountable for their performance in relation to these crimes. Mike Haley from Cifas suggested that one way to achieve this would be to make fraud a Strategic Policing Requirement to ensure that forces are directing sufficient resources to investigate these crimes.84 This view was echoed by the Association of Police and Crime Commissioners, who outlined in their written evidence that “recognising fraud as a priority is a necessary step in continuing the work to build the capabilities and capacity in the whole system to effectively investigate and prosecute fraud.”85 We also heard pleas for fraud to be made a law enforcement priority by the Crown Prosecution Service (CPS), as it is dependent on investigations and referrals in order to increase the levels of fraud prosecutions.86
73. Fraud is not an investigative priority for police forces, partly because it is not a crime type for which forces are held accountable for their performance. Fraud statistics are not included in local and regional performance data despite most of these crimes still being investigated at the local and regional level. Without this data it is impossible to identify weaknesses in the response to these crimes and boost investigations of fraud crimes.
74. Fraud should be made a Strategic Policing Requirement to focus effort and resources on combatting this crime type. Additionally, performance data should be collected, monitored, and published at local and regional levels, as is done for other crime types, to ensure law enforcement bodies are held accountable for their progress in tackling fraud.
Resourcing
75. There is a disparity between the amount of work fraud creates for the police and the resources allocated to it. Fraud now accounts for more than 40% of all crime, yet only 2% of police resources are allocated to fraud. Funding levels assigned to fraud within police forces have remained consistent over recent years despite instances of fraud rising by 24% since the onset of Covid-19.87
76. Across policing there are around 1,000 specialist fraud officers. The Home Office’s Beating Crime Plan committed to increasing investigative capacity not only in the City of London Police, but also in Regional Organised Crime Units across England and Wales. Duncan Tessier, Director of Economic Crime at the Home Office, speaking to the House of Lords Fraud Act 2006 and Digital Fraud Committee, mentioned plans to have increased levels of police officers working within fraud:
We will be looking to put hundreds of new officers in place over the next three years. We are also increasing the input from the intelligence agencies on the response to fraud, which is a significant development.88
77. The Government has committed to recruiting 20,000 new police officers by the end of 2023. Our inquiry heard that of these 20,000, 380 will be dedicated to fraud, being deployed across the National Crime Agency, City of London Police, and Regional Organised Crime Units.89
78. £400 million has been committed to help tackle economic crime over the next three years. Witnesses to the inquiry welcomed this additional funding, with Rob Jones of the NECC outlining that “it will make a big difference. That dedicated resource and the three-year [Spending Review] will make a big difference to planning and moving the dial and is really helpful”.90
79. Reflecting on resourcing, the Eastern Region Special Operations Unit told us that they often lack the resources and expertise to conduct fraud investigations:
There are often unrealistic expectations internally at senior management level around the capability of individual fraud teams/forces to manage complex fraud investigations in terms of complexity, resources required and timescales for investigations.91
80. Evidence received for our inquiry did not solely call for a general increase in police resourcing, but also an increased allocation of existing police resources to tackle the problem of fraud. Mark Fenhalls KC of the Bar Council told us that talented police officers are often moved “into higher-profile parts of policing” as “there are other and better places in the system to be if you are an ambitious, talented officer”, depleting the numbers of experienced officers working within fraud.92 Mark Shelford, representing the Association of Police and Crime Commissioners, also acknowledged that, while more funding is always welcome, there is a need “to work with the tools and resources we have at the moment to maximise their effectiveness.”93
81. The importance of ensuring that the right expertise and resourcing is in place was recognised by the City of London Police, who acknowledged that “the system and how we are set up to navigate it and respond to it is right [ … ] but without the right funding and resourcing to meet this massive threat it will be forever challenging”.94
82. Fraud accounts for more than 40% of all crime yet receives only around 2% of police funding. Out of the 20,000 new police officers being recruited, only 380 are planned to be deployed in the response to fraud. If the Government is serious in its ambition to reduce fraud, it needs to ensure it is allocated sufficient resourcing within police budgets to help identify and prosecute crimes as well as prevent these crimes from occurring. The Government needs to put in place sufficient funding and police resourcing to bring about a step-change in the response to fraud.
Expertise
83. Fraud crimes exploit new technologies, particularly the use of online platforms, and so it is important that policing keeps up with the frequent changes in the way fraud crimes are perpetrated. Clinton Blackburn from the City of London Police reflected on the training police officers receive, noting that this does not appear to have kept pace with the changes in the crime landscape:
I think we trained about 1,000 staff last year across fraud, but fundamentally we need to look at how police officers going through their probationary period are trained […] To some extent, we are probably putting a huge amount of effort sometimes in investigating the old crime types, like burglary offences, when offending is moving on and perhaps the training programmes being delivered to police and other law enforcement have not caught up at quite the same pace.95
84. The view that police officers are not being sufficiently trained in fraud was echoed by Mark Shelford, the Avon and Somerset Police and Crime Commissioner, who said that, although there are specialists in place across forces, general police officers lack expertise in fraud and cyber-crimes. He outlined that work is underway to improve the training but added that he would “not say it is anywhere near where we want it to be”, and that conventional police forces do not have the cyber expertise required to understand some aspects of fraud crimes.96
85. Our inquiry heard that a lack of basic knowledge within first responders to crimes can impact on the outcome of an investigation as potential evidential options can be lost.97 Mark Fenhalls KC of the Bar Council told us about a case where the equipment containing all evidence of the fraud was picked up by chance as part of an investigation, whereas it could easily have been overlooked due to a “lack of awareness of technological development”.98
86. Our inquiry also heard that, while greater cyber and technological expertise is undoubtedly required, more important than increasing the number of specialists is ensuring that all police having “a basic understanding of the digital environment” and are “able to operate in it and mitigate the threat, risk and harm that is there”.99
87. Steps are being taken to improve the level of knowledge amongst first responders. City of London Police is launching an app which will help frontline staff at the scene of a fraud or cyber-crime get advice on best practice in securing evidence and helping the victim.100 We also heard that discussions are ongoing as to how to bring people with a cyber background directly in to the police forces.101
88. Fraud crimes can be easy to spot in many cases if a police officer has adequate awareness of technological developments, but can be missed in the absence of such knowledge. The training of police remains focused on more traditional crime types whereas there is clearly a need for it to keep pace with the changing nature of offending. The College of Policing should conduct a review of the training offered to front-line staff to ensure it reflects the changing crime landscape and provides a strong foundation in crimes that exploit technology such as fraud.
4 Prosecuting fraud
Prosecution
89. In the year ending September 2021, the Crown Prosecution Service (CPS) prosecuted 7,609 defendants where fraud and forgery were the principal offence, with a conviction rate of 84.9%. Whilst this is a relatively high success rate, the level of prosecutions represents only about 0.75% of fraud crimes reported in the year.102 As we have noted already, the level of reported crime does not reflect the true scale of fraud. In short, the number of fraud reports that get to the point of receiving a judicial outcome represents a tiny proportion of fraud crimes.103
90. The CPS can only get involved in the prosecution of a fraud once the police commence an investigation; therefore its activity is restricted to the number of cases the police are able to investigate. As discussed in the previous chapter, fraud is not always an investigative priority, and without cases coming through the pipeline for the CPS to investigate prosecution levels will remain low.
91. The CPS launched its own Economic Crime Strategy in March 2021, with the intention of improving criminal justice outcomes for economic crime.104 The Strategy lays out how the CPS plans to improve its response to fraud by 2025, focusing on prosecuting the right person for the right offence in a timely manner, putting victims and witnesses at the heart of casework, and recovering proceeds of crime.
92. The CPS has a Specialist Fraud Division which provides a specialist prosecution and advisory service for serious and/or complex economic crime cases. Within this division there are around 170 staff dealing with around 700 cases at any one time.105 In addition, there are 150 staff within a dedicated Proceeds of Crime Division working on restraining and confiscating criminal assets.106 In response to the growing threat of economic crime, the CPS is looking to merge these teams alongside others within economic crime to create a new Serious Economic, Organised Crime and International Directorate in order to maximise the specialist knowledge of staff and increase early engagement with law enforcement.
93. Fraud cases can be difficult to prosecute, with many having defendants based outside of the UK jurisdictions. According to the National Fraud Intelligence Bureau, approximately 75% of the fraud crimes prosecuted by the CPS have an international element, with 30% of the crimes committed taking place primarily overseas.107 The CPS has prosecutors deployed overseas to help in these cases; however, it inevitably adds a layer of complexity to the cases.
94. The Minister emphasised to us the importance of working with other jurisdictions to boost the prosecution of fraud crimes, although he recognised difficulties in the fact that “the jurisdictions with which one works with the best efficiency and effectiveness and so on are not necessarily the biggest origin markets” for fraud crimes.108
Dedicated courts
95. The majority of fraud trials are dealt with in the Crown Courts through a jury trial, aside from low-value state benefit frauds which can be heard in the Magistrates’ Court. As a result, fraud trials can be lengthy and have been particularly impacted by Covid-19 when compared to other crime types as the pandemic caused significant difficulties for holding jury trials over other types of court hearing due to social distancing requirements.
96. Fraud trials are often subject to considerable delays, particularly as the backlog of Crown Court cases has grown in recent years. Evidence to our inquiry suggests they are not always a priority for listing, with the Bar Council outlining that fraud trials are “invariably longer than trials for other offences”, partly because fraud cases generally have defendants on bail rather than remanded to custody and therefore often fall behind crimes involving physical harms and those where the offenders are in custody in the priority for listing.109 Delays and lengthy trials were also themes highlighted in the evidence submitted by the City of London Police which highlighted that the complexity and size of fraud cases has resulted in long trials which have often been delayed due to a lack of court availability in the pandemic.110
97. As a result of delays in the progression of those fraud cases that do come to court, victims may have to wait several years for a conclusion of their case and possible compensation to be awarded. In addition, the delays in prosecuting fraud cases and the tendency to use bail over remand to custody for fraud offenders can mean that offenders continue to commit crimes while waiting for the case to be heard in court.
98. In order to increase the number of economic crime cases flowing through the court system in a timely manner, plans are proceeding for the creation of City of London law courts in 2026 which will specialise in hearing economic crime and fraud. Our inquiry heard evidence that this project should be expanded to create other such court centres to specialise in these forms of crime.
99. The benefits of dedicated fraud courts were articulated, for example, in DCI Steven Maloney’s written evidence to the inquiry:
Although I think the cost would be significant I feel a potential solution could be the implementation of dedicated prosecutors and courts to respond to this form of criminality. This would ensure justice was seen to be done in a more effective and efficient manner which would improve victim confidence and engagement. It would also allow us to prosecute offenders in a timelier fashion which would restrict their ability to continue to commit offences whilst under investigation.111
100. The idea of dedicated courts to manage fraud causes has been supported by the CPS, which felt there would be benefits to having judges with expertise to manage fraud cases: “just as it is right to have investigators and prosecutors with the right skills, so too you need judges with the right skills”.112 It was highlighted that specialist economic crime judges may be best placed to oversee fraud cases where there can be vast amounts of evidence and having experience with these cases may help with the case management of trials, particularly the disclosure of evidence.113 In his oral evidence to us, the then Minister for Security and Borders reflected on the proposals for economic crime courts, outlining that the Government was “very keen to look at everything and anything that can improve performance in this area”.114
101. We have heard compelling proposals for dedicated economic crime courts to ensure there are judges with the right skills to oversee what can often be lengthy and sometimes complex cases. This would also help address the backlog in fraud cases, which are not always seen as a priority for listing. We support the steps the Government is taking in this direction. The Government should work with the Judiciary to pilot the establishment of economic crime courts. If the pilots are successful, these types of court should be established around the country to reflect the geographic diversity in the crimes being perpetrated.
Disclosure of evidence
102. As fraudsters increasingly exploit technology to commit their crimes, the volume of evidence underpinning cases has increased exponentially. Even in straightforward cases the volume of digital material submitted as evidence can be immense. We heard that changes to the Attorney General’s Guidelines on Disclosure in December 2020 and increasing sizes of digital evidence bases have resulted in an increase in the time required to investigate and prosecute fraud offences due to the increased disclosure requirements.115
103. As a response to the growing evidence base, the CPS is exploring opportunities to use new technologies such as artificial intelligence to facilitate the management of potential evidence. The Serious Fraud Office already employs technological tools to help with its evidence; however, it has called for the development of clear frameworks for the use of block listing, metadata, and technological search tools, in order to ensure these are being consistently applied in ways which will be acceptable for use in court cases.116
104. The Association of Police and Crime Commissioners highlighted in their written evidence to our inquiry that poor casefile quality is an issue consistently raised in relation to the investigation and prosecution of fraud.117 It outlined that in order to increase the number of successful outcomes for fraud, this issue needs to be addressed.
105. Our inquiry repeatedly heard that the existing legislation on disclosure was created at a time when the current volume of evidence submitted for cases could not have been envisaged.118 Mark Fenhalls KC of the Bar Council articulated his view that “[t]he Act that governs disclosure was invented in the analogue age”119 and is therefore difficult to adapt to fraud cases with vast amounts of digital data. Lisa Osofsky, director of the Serious Fraud Office, has also called for revisions to the Criminal Procedure and Investigations Act 1996 which could:
Address large cases like ours, with millions and millions of documents, and manage those cases in a way that makes sure that we narrow down the issues before we get into court so that we know what we are facing and the defence knows what it has to defend against, and so that the victims in these cases actually get their day in court and justice is served for victims.120
106. We heard from the Home Office that the issues surrounding disclosure are recognised; reflecting that “there is not … a systemic issue of disclosure with respect to fraud; it is perhaps an issue connected more with the application of the law rather than the law itself.”121 This view was echoed by Gregor McGill of the CPS who told us he was unconvinced there was a problem with the underlying legislation, but that there was “a real problem in the way the system is operated”.122
107. We heard from witnesses who outlined how significant the volume of evidential documentation relating to fraud cases can be. The City of London Police has more than 70 million pages of evidence relating to its current ongoing investigations.123 It has estimated that the current disclosure system typically adds six months to a medium-sized investigation, and considerably longer in the case of the most significant frauds.124 Mark Fenhalls KC of the Bar Council told us about the “spectacular amount of police time” being wasted “because police officers have to black-line vast amounts of data which, on the facts of most cases, is completely unnecessary.”125
108. The Bar Council also outlined the difficulties posed by the volume of evidence on preparation for trials and how time can be wasted on material that is not fundamental to the case:
The reality is that much time in fraud is expended on reviewing and collating material which ultimately is only of marginal, if any, relevance to the trial issues, but necessarily has to be reviewed as it cannot simply be ignored.126
109. Our inquiry heard of problems with the application of disclosure rules which can result in significant amounts of police and prosecution time being spent redacting and disclosing vast amounts of material that turns out to be unnecessary to the case eventually pursued. We are not convinced that the underlying disclosure legislation is the problem but rather there needs to be clearer guidelines on how this legislation should operate in cases with significant amounts of digital material. The Attorney General should review the current disclosure guidelines and consider whether there is merit in introducing specific guidance on disclosure in fraud cases with large quantities of digital material.
Engagement
110. Our inquiry heard that one way to streamline fraud cases is to have greater engagement between prosecution, investigators, and the defence to discuss what is in scope of a prosecution before the trial commences. Gregor McGill from the CPS highlighted to us that this early engagement would:
[r]educe time, not just in the evidential stage but at the disclosure stage, because if you limit the scope of your issues between the parties, that initial disclosure exercise could make cases much smaller and more self-contained and would take them through the system much quicker127.
111. An Attorney General review of the efficiency and effectiveness of disclosure in the criminal justice system in 2018 found that early and meaningful engagement between the prosecution and defence was crucial to improving the disclosure process, particularly where there is a large quantity of digital material as is so often the case in fraud cases.128 The importance of early engagement was reiterated by the then Attorney General in May 2022, ahead of the publication of updated Disclosure Guidelines in July 2022.129 Evidence from the Serious Fraud Office also highlighted early defence engagement as key to successful prosecutions.130
112. Evidence from police forces also outlined the benefits of early engagement, with some calling for such engagement to be compulsory in order to agree reasonable parameters for an investigation.131 The benefits of early engagement was further illustrated in the submission to this inquiry by HMRC, which wrote of how early engagement between investigators and prosecutors at the outset of an investigation can “greatly help shape an effective investigation strategy”.132
113. The CPS told us early engagement was one of its priorities in relation to fraud and outlined that it would support a requirement to “capture our commitment with law enforcement early on in cases to help drive better criminal justice outcomes.”133 This engagement early on in a case can help ensure investigations are directed towards matters that are likely to help prosecutions.
114. Currently, those working for the defence do not get paid for early engagement. In our 2021 inquiry into the Future of Legal Aid, we called for focus to be placed on early engagement and on ensuring that providers are paid for all the work they do for their clients, recommending that:
The Government should reform the fee structure to prioritise quality over quantity and to allow criminal defence lawyers to spend more time on the most difficult cases at the earliest possible stage […] There are also clear benefits for the operation of the criminal justice system if more work can be done at an early stage to make progress on a case.134
115. The need to encourage early engagement was also a finding of the Independent Review of Criminal Legal Aid. The Government has accepted the majority of the findings of this review, including incentivising early advice where appropriate through a 15% increase in solicitor remuneration at the police station and Magistrates’ Court. In addition to these uplifts, a commitment has been made to explore further reform of fee schemes in order to encourage early engagement even more in the longer term.135
116. Greater engagement between the police, prosecution and defence has been highlighted as best practice for determining the scope of prosecutions and helping conclude cases in a timely manner. A key barrier to this engagement has been the lack of legal aid funding, and so we welcome the Government’s recent commitments in relation to ensuring this early engagement is incentivised through the legal aid schemes.
Sentencing Guidelines
117. Under current sentencing guidelines, fraud crimes carry penalties of up to 10 years imprisonment for the most severe cases. However, for crimes where the financial loss is less than £5,000, the maximum tariff is one year’s custody with the majority of those found guilty instead receiving a fine or community order.136 The City of London Police and other contributors to our inquiry called for these guidelines to be revisited, as the impact of losing £5,000 to one person can be as significant as the impact of losing £50,000 is to another.137
118. The current sentencing guidelines focus on the level of financial loss resulting from a crime rather than the impact on victims. Sentencing guidelines for other crimes, such as assault, take into consideration the psychological distress caused to a victim. As discussed in chapter 2, the impact of fraud crimes can go far beyond financial loss, with some victims of these crimes experiencing profound emotional and psychological distress. We heard that the focus on financial loss “is based on an out-of-date view that fraud victims only suffer financial harm and only require financial reparations for their harm.”138
119. In addition to the consideration of the impacts on the victim, the City of London Police also called for other aggravating factors to come into consideration, such as hindering recovery of money to the victims, as well as calling for sentences to be strengthened with maximum sentences brought in line with those for money laundering.139
120. The CPS also supported the expansion of sentencing guidelines to consider factors outside of pure financial loss, emphasising the importance of seeing the full context of fraud crimes, outlining that “it is not just the financial effect but the compromising effect on the way we lead our lives.”140
121. However, not all witnesses to our inquiry felt that the sentencing guidelines required amendment. Mark Fenhalls KC of the Bar Council outlined that he had “no particular complaint about any of them”, highlighting instead that the issue was that sentencing guidelines do not act as a deterrent to those committing the crimes as offenders are aware that the chances of being subjected to criminal punishment for fraud crimes are very low.141
122. The loss of a comparatively small amount of money can have a greater impact on one individual than the loss of a greater amount on another. The current sentencing guidelines do not recognise this and therefore overlook the emotional and psychological impact that fraud crimes can have on their victims. Sentencing guidelines should be amended to give greater consideration to the emotional and psychological harms caused by fraud crimes alongside the financial losses incurred.
5 Disrupting and preventing fraud
123. Our report so far has considered the initial victim response to, and the investigation and prosecution of, fraud crimes. However, with the number of these crimes continuing to increase, our inquiry repeatedly heard that early disruption and prevention was key to delivering the best outcomes for the public and the economy. The volume of fraud originating from foreign jurisdictions with low prospects of conviction are another factor pointing to the need to prioritise prevention. There is simply not the capacity within the criminal justice system to tackle the millions of fraud crimes taking place each year, as Mark Steward of the FCA told us: “for all the will in the world, with the most efficient volume-oriented prosecution programme, you will not be able to capture all of what is happening on the internet”.142 As the Association of Police and Crime Commissioners noted: “we are not going to arrest our way out of this” and the “best way to tackle fraud is to prevent victimisation”.143
124. Investigation and prosecution of fraud undoubtedly has a role to play. However, prevention work is key to tackling the scale and nature of volume fraud. Rob Jones of the NECC outlined to us:
Being able to bring people to justice so that they are not emboldened and victims see a result is important but preventing it from happening in the first place is really important because so much of it is preventable.144
125. We heard evidence from the Government that for high-volume, lower-value frauds it can be particularly hard to gather the intelligence needed to put together a good investigation. Therefore, it is vital to focus efforts on making it harder for criminals to commit these crimes in the first place rather than try to investigate and prosecute them once they have been committed.145
126. The Government relaunched the Joint Fraud Taskforce in October 2021 to bring together key government figures, law enforcement and private sector partners to tackle fraud. The Taskforce is chaired by the Minister for Security and Borders, and comprises senior representatives from industry, the third sector, law enforcement, and government.
127. It is anticipated that the Taskforce will produce a new Fraud Action Plan later in 2022. The plan is expected to outline how the Government intends to reduce the number of frauds committed, alongside increasing the number of frauds successfully investigated and prosecuted. The Taskforce has also agreed a number of fraud charters with the retail banking, telecommunications, and accountancy sectors, committing these industries to work with government to reduce the growing threat of fraud and protect the public.
128. The importance of collaborative working to tackle fraud was highlighted to us by Katy Worobec of UK Finance, who welcomed the Government using its convening power to bring people to the table. She told us that fraud:
[i]s not something that can be tackled by any one sector on its own; everybody has to come together, by which I mean all parts of Government, ourselves, our sector, the tech sector, the telecoms industry, and legal accountancy.146
129. This perspective was echoed by the Home Office’s submission to our inquiry which outlined that:
[t]ackling fraud requires a unified and co-ordinated response from government, law enforcement, and the private sector to better protect the public and businesses from fraud, reduce the impact of fraud on victims and increase the disruption and prosecution of fraudsters.147
130. The Government’s evidence stated that it was working with the tech industry to “close down the vulnerabilities that fraudsters exploit”.148 However, sector charters are not yet in place with social media and other tech companies, industries which will play a key role through designing fraud out of their systems.
131. We questioned witnesses to our inquiry as to whether the Government is required to play a role in uniting private sector bodies to do more in the fight against fraud. We heard that many industries already have plans underway to try to reduce fraud on their platforms, but that having Government input and using their convening power will move this collaboration forward at a quicker pace than would be achieved without it.149
132. Our inquiry has repeatedly heard that the most effective way to tackle fraud is to prevent it occurring in the first place. This requires co-operation across the private and public sectors, with the Government using its convening power to unite stakeholders around the ambition to reduce fraud. The relaunch of the Joint Fraud Taskforce is a good start, bringing stakeholders together to discuss a common approach to fraud, and the Committee welcomes the intention to produce a new Fraud Action Plan.
133. Government should continue to bring together the public and private sectors and ensure that the upcoming Fraud Action Plan sets out its ambition for tackling fraud, how this will be achieved, and the roles and responsibilities each industry has within a unified response to fraud.
134. Consumers are increasingly being scammed through their interactions with the telecommunications and tech sectors, for example through the use of landlines, mobile phones, text messages and email as well as via online platforms.150 Companies in the tech sector have committed to taking increased action to address fraud. We heard from TechUK that Twitter, Meta and Microsoft have committed to a new advertising process that requires financial services advertisers to be authorised by the FCA in order to prevent investment scams. This is already in place at Google, TikTok and Amazon.
135. Although individual initiatives are a good start, there was an acknowledgement that more could be done by those working in the telecommunications and tech sectors to counter fraud. We heard calls for more emphasis to be placed on awareness and education not only for the public but also large corporations on the importance of tackling fraud and protecting consumers who use their services.151 Luke Taylor of Telecommunications UK Fraud Forum highlighted that companies can be focused on large frauds that impact their bottom-line revenue rather than smaller consumer-based frauds.152
136. The scale of frauds is vast. In Q4 of 2021 alone, Meta removed 1.7 billion fake accounts, often a source of frauds and scams, from Facebook. 99.9% of these were removed through the use of AI rather than being reported by an individual. We have heard that detecting fraudulent adverts that may appear on online interfaces is much harder to spot, as content is “specifically designed to appear to be legitimate both to systems and to users”.153 We received evidence that due to the constantly changing picture, organisations are often lagging behind in their response to specific frauds,154 with perpetrators of fraud “continually searching for ways to subvert the rules, processes and safeguards” put in place to protect users.155 However, it also had been raised in submissions to our inquiry that tech companies are currently “under no obligation to identify the legitimacy of those placing adverts nor to take down harmful content” and therefore combatting these scams may not be considered a priority for these companies.156
137. We acknowledge that telecommunications and tech companies are taking steps to improve their response to fraud, however they remain platforms through which the majority of frauds impacting the general public are conducted. There still appears to be a lack of engagement on this subject from those sectors, not least amongst the telecommunications companies. Fraudsters may be using increasingly sophisticated technologies and methodologies to conduct their crimes but we are not convinced that the largest companies in those sectors do not have the capabilities to increase their efforts to tackle these changes and prevent frauds, particularly in paid-for-advertising, from appearing on their systems. Fraud may not have a significant impact on the bottom-line of those companies, however they have a duty of care to their users to ensure everything possible is being done to design frauds out of their systems in order to protect the public.
138. Tech and social media companies have a vital role to play in designing fraud out of their systems to help prevent so many frauds from being conducted online. The Government should prioritise putting in place charters with the social media and tech companies to capture their commitments and responsibilities in relation to tackling fraud, and to enable them to be held to account by government for their progress in this respect.
Failure to prevent offence
139. Banks have a regulatory obligation to ensure that they have effective systems and controls in place to prevent financial crime that includes their customers being exposed to frauds. These obligations are not in place for other industries such as online and social media companies where frauds can proliferate. Dame Vera Baird KC, the then Victims’ Commissioner, told us she believed that more should be done to ensure that the platforms used by fraudsters take some responsibility for preventing these crimes from taking place.157
140. As Mike Haley of Cifas outlined to us, sectors of industry may currently have their platforms used by those wishing to perpetrate fraud crimes but as they are not harmed themselves preventing fraud is not seen as a business priority. He argued that requiring companies to introduce systems to prevent fraud would “drive a lot of activity by organisations to look at how they could prevent economic crime and have a due diligence effect”.158
141. Section 7 of the Bribery Act 2010 contains an offence of corporate failure to prevent bribery, where a commercial organisation can be found guilty of an offence if there was a failure to prevent a bribe being paid on the organisation’s behalf. We heard that the Act has been successful in bringing about corporate focus on putting in place anti-bribery structures and that businesses were happy to implement changes to comply with it.159 Witnesses to our inquiry called for an expansion of ‘failure to prevent’ offences to cover failures within businesses to enact adequate systems to detect and prevent fraud.160
142. We heard from the CPS about how introducing a failure to prevent fraud offence could contribute towards the protection of the public and prevention of fraud, not so much from increasing the level of prosecution but encouraging better corporate practices and anti-fraud policies within companies:
We have to look at the protect space and the prevent space, and that is why we are quite keen to promote a failure to prevent change in the legislation, not so much because it will lead to more prosecutions of companies, although it might if it were on the statue book, but because it will drive better corporate behaviours and switch the responsibility of companies to there being an onus on them to have proper systems in place to protect people from fraud in the first place, rather than being reactive to fraud that is happening.161
143. This stance was supported by the Serious Fraud Office, whose director told us that a ‘failure to prevent’ offence was top of her wish list for changes she would like to see. Lisa Osofsky, Director of the Serious Fraud Office, told us that “failure to prevent would be a sea-change in economic crime.”162
144. We have heard proposals that fines incurred as a result of breaches of a failure to prevent offence could be used to compensate victims of frauds perpetrated using platforms with inadequate anti-fraud measures in place. This would boost the number of victims receiving compensation in cases where retrieving funds from the perpetrator of the crime is not possible.
145. The Law Commission has recently published an options paper looking at corporate criminal liability. One of the options it has outlined is a “failure to prevent fraud by an associated person”, modelled on the offences in the Bribery Act 2010 and Criminal Finances Act 2014.163 It has also outlined several civil rather than criminal measures, such as requiring certain companies to publish the details of their anti-fraud policies.
146. The ‘failure to prevent’ offence for bribery has had success in driving better corporate behaviours. A similar offence for failure to prevent fraud being perpetrated using a company’s platforms would not only aid prosecution for these failures but focus private sector effort on designing fraud out of companies’ systems. A failure to prevent fraud offence should be introduced to hold companies to account for fraud occurring on their systems and encourage better corporate behaviours.
Sharing of information
147. Our inquiry heard that companies hold vast amounts of information which could be used to help identify and prevent frauds; however, there is currently little sharing of this information between private and public sector bodies. In their evidence Cifas told us that:
[l]aw enforcement could make huge gains in disruption and prevention through sharing intelligence, typologies, and data with industry, to empower organisations to tackle enablers and increase their defences. Presently this sharing is the exception rather than the rule, despite the wealth of intelligence available to law enforcement from the industry data being shared.164
148. The impact that improved data sharing could have was articulated in evidence from the Regional Organised Crime Unit for the West Midlands Region who stated that increased sharing of information between the banking sector and law enforcement could lead to quick interceptions and disruptions in fraud, helping prevent victimisation.165
149. Adrian Darbishire KC outlined in his submission to the inquiry that there is currently “no effective mechanism” for law enforcement to work effectively with financial or commercial enterprises to address offending.166
150. We heard concerns that businesses’ understanding of GDPR regulations can lead them to believe they cannot share information on suspicions of fraud or money laundering. This is a particular problem where a bank closes the account of an individual on the suspicion that they are committing a crime but no information is then shared to prevent that individual opening another bank account with a different institution to continue their crimes.167
151. When asked whether data sharing posed a problem for the Financial Conduct Authority, Mark Steward agreed and outlined that “sharing information between [banks] and regulators, and law enforcement sharing information with one another still needs some work.”168 It is not clear whether these difficulties are because of the provisions in the Data Protection Act itself or merely a perception of the restrictions the Data Protection Act is intended to put in place. We raised the issue of data sharing with the government and were informed that it is an issue that is being considered with partners through the Economic Crime Strategic Board and the Economic Crime Delivery Board.169
152. Katy Worobec told us about the information and intelligence sharing that UK Finance provides to the National Fraud Intelligence Bureau and the National Crime Agency. However, she outlined that “where we get stuck sometimes is being able to share information and intelligence across the sector and with other sectors.” She highlighted that more could be done to tackle fraud if there were mechanisms for sharing this information and intelligence more easily.170 She spoke of her hope that provisions relating to this could be included in additional legislation under the Economic Crime Act 2022.
153. In their update on progress in relation to the Economic Crime Plan, the Home Office stated that it was in the process of reviewing the legislation in respect of the sharing of data with specified anti-fraud organisations to ensure it remains fit for purpose.171 This work was expected to conclude in June 2022.172
154. We are concerned to hear that there is a perception that legislation such as GDPR is preventing the sharing of information and intelligence across sectors where frauds were suspected. Data-sharing laws should not restrict the sharing of information for law enforcement purposes, or where this information could prevent a fraudster being able to move to a new bank or platform to continue their crimes.
155. The Government should provide an update of its review of the legislation in respect of the sharing of data with a Specified Anti-Fraud Organisation. The Government should also look more broadly at the operation of data-sharing legislation with regard to the tackling of fraud and bring forward proposals to ensure data can be shared for the purposes of combatting fraud as soon as possible.
Online Safety Bill
156. The Online Safety Bill, included in the 2022 Queen’s Speech, aims to make the UK the “safest place to be in the world online”. Fraud has specifically been brought into the scope of the Bill—it is named as a priority offence which requires platforms not just to remove harmful content when notified of it, but to proactively stop it appearing in the first place.173 Many of the bodies who submitted evidence to our inquiry have also worked with the Government on the contents of the proposed Bill.
157. In March 2022 the Government announced a consultation into paid-for advertising to tackle the lack of transparency and accountability in this area. This was welcomed by many who contributed to our inquiry and who had called for it to be included in the scope of the Bill prior to the Government’s announcement being made, although questions have been raised as to whether penalties will be imposed on entities that breach the new regulations.174 In addition, a new legal duty is due to be added to the Online Safety Bill requiring social media platforms and search engines to prevent paid-for fraudulent adverts appearing on their services.
158. We welcome the opportunity the Online Safety Bill presents to require companies to do more to prevent frauds from being perpetrated on their platforms, and to strengthen the obligations of companies to ensure the safety of their online users.
Public awareness
159. While the Government and industry have a significant role to play in the prevention of fraud, another key aspect of prevention is raising public awareness surrounding the threat fraud poses and how to avoid falling victim to these crimes. The then Victims’ Commissioner told us she did not feel that the public was aware of how widespread the problem of fraud is.175 She called for a collaborative approach to public messaging, which:
would be a great deal of public awareness and public education of a consistent kind, so that it is not coming from different quarters, and there is a recognisable place where you can be educated to take appropriate care of yourself and how you can be approached. Secondly, there would be somewhere you can check perhaps if something that you are starting to engage in is going to be a fraud or may be a fraud.176
160. The importance of national information campaigns was further articulated by Mike Haley of Cifas, who highlighted that people could be protected from falling victim to frauds “through good national messaging, co-ordinated across the public and private sectors”.177
161. There are ongoing attempts at boosting public awareness of frauds. The FCA runs their ScamSmart campaign, advertised across TV, radio, and online, to increase consumer awareness of scams, highlighting frauds such as investment scams, pensions scams and loan fee frauds.178 Nine campaigns have been run over the last five years, with banks and other organisations feeding into these campaigns to ensure messages are put in the right place. However, these campaigns do not seem to reach the vast majority of the public; as Mark Steward of the FCA outlined, greater resourcing is required to truly saturate public consciousness and raise awareness of the dangers of fraud and how to prevent being victimised:
the issue is one of scale, because the amount of resource and money we have to fund these campaigns is limited. We are a regulator; we are not a national Government body. The service needs saturation marketing; it needs something more than we can give it to ensure that the message hits home.179
162. This messaging is not only the responsibility of government and public bodies. Wayne Stevens of Victim Support outlined to us the responsibility of all industries in promoting public awareness:
there is an opportunity for much greater collaboration between financial institutions, social media and tech companies, telecoms companies, law enforcement, and, of course, consumer groups to generate consistent, clear messaging around the risk of fraud, the impacts of fraud, what to do to report them and how to stay safe.180
163. Key to the prevention of fraud is increasing public awareness of these crimes and the steps people can take to avoid being victimised. Although campaigns are currently run by the Financial Conduct Authority and its partners, these do not have the level of resources required to proliferate messages about fraud and fraud prevention among the general public. The Government should plan a national awareness campaign as part of the new Fraud Action Plan, to raise public awareness of fraud and the personal actions people can take to reduce their chances of falling victim to such crimes.
Conclusions and recommendations
Introduction and Government commitments to tackle fraud
1. There is currently an epidemic of fraud in England and Wales. The level of fraud has been increasing year on year and this growth accelerated during the pandemic to an unprecedented level. As the country emerges from the Covid-19 pandemic, there are no signs of a reversal in the upward trend. (Paragraph 9)
2. As the ways in which frauds are being perpetrated change, making increased use of the online sphere and new technologies, the enforcement and prosecution of these crimes also needs to adapt to keep pace with the crimes being conducted. (Paragraph 12)
3. Fraud is a growing issue and one which does not sit naturally with the other elements of the Minister for Security and Borders extensive portfolio. (Paragraph 20)
4. Fraud and other forms of economic crime need to sit within a Ministerial portfolio that allows the postholder to prioritise this increasingly important area of work, and who can draw together parts of government and private sector companies to create a unified approach to tackling fraud. This should also be in such a way as will give the issue more publicly visible political and governmental ownership and accountability. (Paragraph 20)
Victims
5. Fraud crimes do not impact victims equally and due to limitations in victim support capacity, efforts to support victims of fraud should be focused on those who need it most. It is therefore vital that responders to these crimes have the training and experience required to identify who may need further support and can direct them to services which can provide this aid. (Paragraph 27)
6. Support available for victims of fraud is patchy and inconsistent. Thirty-seven police forces currently work with victim care units. However this is not compulsory and there is currently no national standard for fraud victim care. (Paragraph 31)
7. The Government should set a minimum standard of care that a victim of fraud can expect to receive when reporting a crime and ensure that all 43 police forces in England and Wales are working with victim care units to provide victims with effective support by the end of 2023. (Paragraph 31)
8. Many victims of fraud find it difficult to know how to report the crime. It needs to be made much clearer to victims how they can report a crime, as the current lack of clarity brings added distress to the process. We acknowledge that increasing awareness of Action Fraud will place increased pressure on the already stretched reporting service, but it is vital that victims feel able to report their crimes both for the individual to feel that they are being listened to, and also to help build a national picture of fraud crimes. (Paragraph 37)
9. The Government should increase efforts in advertising Action Fraud to raise public awareness of how to report incidents of fraud. (Paragraph 37)
10. Individual police forces do not have the capacity to manage the volume of fraud reports made and so it is vital that there is an effective reporting service that is victim-focused and can deal consistently with reports and progress cases swiftly to a resolution, all while keeping the victim updated on the actions being taken. Action Fraud has not proved itself to be fit for these purposes and is not sufficiently resourced to meet the growing and varied challenges of fraud. Action Fraud is due to be replaced in 2024; however, victims should not have to wait until then before they begin to see an improvement to the mechanisms for reporting fraud and monitoring the progress of their cases. The Government should take steps now to address these issues. (Paragraph 42)
11. Although the level of staffing at Action Fraud’s reporting call centre has increased from 75 to 95, this is clearly not sufficient to provide an adequate service to all those reporting a fraud. (Paragraph 43)
12. Sufficient staffing needs to be put in place to ensure Action Fraud and its successor service can provide a high-quality service to victims, keeping them updated on the progress of their case and directing them to appropriate support services where required. (Paragraph 43)
13. We welcome the Government’s plans to replace Action Fraud with a new service in 2024; however, we understand from the Government’s evidence to our inquiry that the planned changes are focused on the technology underpinning the service, primarily improving the analytical tools applied when a crime is reported rather than improving customer experience. While this is an important development, changes to the service also clearly need to bring about improvements in the victim’s experience of reporting a fraud crime. (Paragraph 48)
14. While we welcome the Government’s commitment to replace Action Fraud with a new service better able to record and disseminate information about a crime, the service also needs to focus on victim experience, ensuring there are trained individuals staffing Action Fraud’s successor who can assess the needs and vulnerabilities of victims and direct them to appropriate resources. (Paragraph 49)
15. The Government should introduce changes to compensation order legislation to allow for flexibility in altering the order value if a criminal is later found to have assets of greater value which can be used to compensate victims of their crimes. This would bring practice into line with that already in place for the amendment of confiscation orders to allow for increased asset recovery. (Paragraph 52)
16. We are wary of placing too great an emphasis on the compensation of victims. We do not want to give criminals carte blanche to commit their crimes just because victims can be reimbursed, since their crimes will continue to have a significant financial impact on the UK economy, as well as millions of banking customers, even if these losses are not borne by the defrauded individuals directly. The main focus should be on ensuring these crimes are prevented where possible; however, maximising the recovery of assets for victim compensation should be a priority for investigatory bodies once they become aware of a crime having taken place. (Paragraph 57)
Investigating Fraud
17. Within policing, there are various chains of command when it comes to tackling fraud cases, with investigations being conducted at a local level but with central bodies, namely the City of London Police and the National Economic Crime Centre, having responsibility for the overall approach to combatting fraud. This can create confusion and lead to the passing of responsibility for fraud cases between forces and other police organisations. (Paragraph 63)
18. The Government should ensure agreements are in place between the City of London Police, the National Economic Crime Centre, and local police forces to outline responsibilities in relation to fraud and also highlight the support available to local forces working within fraud from centralised bodies. (Paragraph 64)
19. Fraud is not an investigative priority for police forces, partly because it is not a crime type for which forces are held accountable for their performance. Fraud statistics are not included in local and regional performance data despite most of these crimes still being investigated at the local and regional level. Without this data it is impossible to identify weaknesses in the response to these crimes and boost investigations of fraud crimes. (Paragraph 73)
20. Fraud should be made a Strategic Policing Requirement to focus effort and resources on combatting this crime type. Additionally, performance data should be collected, monitored, and published at local and regional levels, as is done for other crime types, to ensure law enforcement bodies are held accountable for their progress in tackling fraud. (Paragraph 74)
21. Fraud accounts for more than 40% of all crime yet receives only around 2% of police funding. Out of the 20,000 new police officers being recruited, only 380 are planned to be deployed in the response to fraud. If the Government is serious in its ambition to reduce fraud, it needs to ensure it is allocated sufficient resourcing within police budgets to help identify and prosecute crimes as well as prevent these crimes from occurring. (Paragraph 82)
22. The Government needs to put in place sufficient funding and police resourcing to bring about a step-change in the response to fraud. (Paragraph 82)
23. Fraud crimes can be easy to spot in many cases if a police officer has adequate awareness of technological developments, but can be missed in the absence of such knowledge. The training of police remains focused on more traditional crime types whereas there is clearly a need for it to keep pace with the changing nature of offending. (Paragraph 88)
24. The College of Policing should conduct a review of the training offered to front-line staff to ensure it reflects the changing crime landscape and provides a strong foundation in crimes that exploit technology such as fraud. (Paragraph 88)
Prosecuting fraud
25. We have heard compelling proposals for dedicated economic crime courts to ensure there are judges with the right skills to oversee what can often be lengthy and sometimes complex cases. This would also help address the backlog in fraud cases, which are not always seen as a priority for listing. We support the steps the Government is taking in this direction. (Paragraph 101)
26. The Government should work with the Judiciary to pilot the establishment of economic crime courts. If the pilots are successful, these types of court should be established around the country to reflect the geographic diversity in the crimes being perpetrated. (Paragraph 101)
27. Our inquiry heard of problems with the application of disclosure rules which can result in significant amounts of police and prosecution time being spent redacting and disclosing vast amounts of material that turns out to be unnecessary to the case eventually pursued. We are not convinced that the underlying disclosure legislation is the problem but rather there needs to be clearer guidelines on how this legislation should operate in cases with significant amounts of digital material. (Paragraph 109)
28. The Attorney General should review the current disclosure guidelines and consider whether there is merit in introducing specific guidance on disclosure in fraud cases with large quantities of digital material. (Paragraph 109)
29. Greater engagement between the police, prosecution and defence has been highlighted as best practice for determining the scope of prosecutions and helping conclude cases in a timely manner. A key barrier to this engagement has been the lack of legal aid funding, and so we welcome the Government’s recent commitments in relation to ensuring this early engagement is incentivised through the legal aid schemes. (Paragraph 116)
30. The loss of a comparatively small amount of money can have a greater impact on one individual than the loss of a greater amount on another. The current sentencing guidelines do not recognise this and therefore overlook the emotional and psychological impact that fraud crimes can have on their victims. (Paragraph 122)
31. Sentencing guidelines should be amended to give greater consideration to the emotional and psychological harms caused by fraud crimes alongside the financial losses incurred. (Paragraph 122)
Disrupting and preventing fraud
32. Our inquiry has repeatedly heard that the most effective way to tackle fraud is to prevent it occurring in the first place. This requires co-operation across the private and public sectors, with the Government using its convening power to unite stakeholders around the ambition to reduce fraud. The relaunch of the Joint Fraud Taskforce is a good start, bringing stakeholders together to discuss a common approach to fraud, and the Committee welcomes the intention to produce a new Fraud Action Plan. (Paragraph 132)
33. Government should continue to bring together the public and private sectors and ensure that the upcoming Fraud Action Plan sets out its ambition for tackling fraud, how this will be achieved, and the roles and responsibilities each industry has within a unified response to fraud. (Paragraph 133)
34. We acknowledge that telecommunications and tech companies are taking steps to improve their response to fraud, however they remain platforms through which the majority of frauds impacting the general public are conducted. There still appears to be a lack of engagement on this subject from those sectors, not least amongst the telecommunications companies. Fraudsters may be using increasingly sophisticated technologies and methodologies to conduct their crimes but we are not convinced that the largest companies in those sectors do not have the capabilities to increase their efforts to tackle these changes and prevent frauds, particularly in paid-for-advertising, from appearing on their systems. Fraud may not have a significant impact on the bottom-line of those companies, however they have a duty of care to their users to ensure everything possible is being done to design frauds out of their systems in order to protect the public. (Paragraph 137)
35. Tech and social media companies have a vital role to play in designing fraud out of their systems to help prevent so many frauds from being conducted online. (Paragraph 138)
36. The Government should prioritise putting in place charters with the social media and tech companies to capture their commitments and responsibilities in relation to tackling fraud, and to enable them to be held to account by government for their progress in this respect. (Paragraph 138)
37. The ‘failure to prevent’ offence for bribery has had success in driving better corporate behaviours. A similar offence for failure to prevent fraud being perpetrated using a company’s platforms would not only aid prosecution for these failures but focus private sector effort on designing fraud out of companies’ systems. (Paragraph 146)
38. A failure to prevent fraud offence should be introduced to hold companies to account for fraud occurring on their systems and encourage better corporate behaviours. (Paragraph 146)
39. We are concerned to hear that there is a perception that legislation such as GDPR is preventing the sharing of information and intelligence across sectors where frauds were suspected. Data-sharing laws should not restrict the sharing of information for law enforcement purposes, or where this information could prevent a fraudster being able to move to a new bank or platform to continue their crimes. (Paragraph 154)
40. The Government should provide an update of its review of the legislation in respect of the sharing of data with a Specified Anti-Fraud Organisation. The Government should also look more broadly at the operation of data-sharing legislation with regard to the tackling of fraud and bring forward proposals to ensure data can be shared for the purposes of combatting fraud as soon as possible. (Paragraph 155)
41. We welcome the opportunity the Online Safety Bill presents to require companies to do more to prevent frauds from being perpetrated on their platforms, and to strengthen the obligations of companies to ensure the safety of their online users. (Paragraph 158)
42. Key to the prevention of fraud is increasing public awareness of these crimes and the steps people can take to avoid being victimised. Although campaigns are currently run by the Financial Conduct Authority and its partners, these do not have the level of resources required to proliferate messages about fraud and fraud prevention among the general public. The (Paragraph 163)
43. The Government should plan a national awareness campaign as part of the new Fraud Action Plan, to raise public awareness of fraud and the personal actions people can take to reduce their chances of falling victim to such crimes. (Paragraph 163)
Formal minutes
Tuesday 11 October 2022
Members present:
Sir Robert Neill, in the Chair
Maria Eagle MP
Paul Maynard MP
Dr Kieran Mullan MP
The following declarations of interest to the inquiry were made181.
Fraud and the Justice System
Draft Report (Fraud and the Justice System), proposed by the Chair, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 163 read and agreed to.
Summary agreed to.
Resolved, That the Report be the Fourth Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available (Standing Order No. 134).
Adjournment
Adjourned till Wednesday 19 October 2022 at 2.00 pm
Witnesses
The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications page of the Committee’s website.
Tuesday 22 February 2022
Mike Haley, Chief Executive Officer, CIFAS; Dame Vera Baird KC, Victims’ Commissioner, Victims’ Commissioner for England and Wales; Wayne Stevens, National Fraud Lead, Victim SupportQ1–62
Rob Jones, Interim Director General, National Economic Crime Centre; Temporary Commander Clinton Blackburn, Head, City of London Police’s Economic Crime Directorate; Mark Shelford, Police and Crime Commissioner, Avon and Somerset and Economic and Cybercrime Lead of the Association of Police and Crime CommissionersQ1–62
Tuesday 15 March 2022
Gregor McGill, Director of Legal Services, Crown Prosecution Service; Mark Fenhalls KC, Chair, Bar CouncilQ63–162
Mark Steward, Executive Director of Enforcement and Market Oversight, Financial Conduct AuthorityQ63–162
Tuesday 22 March 2022
Lulu Freemont, Head of Digital Regulation, Tech UK; Luke Taylor, Member, Telecommunications UK Fraud Forum; Katy Worobec, Managing Director for Economic Crime, UK FinanceQ163–211
Rt Hon Damian Hinds MP, Minister for Security and Borders, Home Office; Duncan Tessier, Director for Economic Crime, Home OfficeQ163–211
Wednesday 20 April 2022
Rt Hon Damian Hinds MP, Minister for Security and Borders, Home Office; Duncan Tessier, Director for Economic Crime, Home OfficeQ212–261
Published written evidence
The following written evidence was received and can be viewed on the inquiry publications page of the Committee’s website.
FRA numbers are generated by the evidence processing system and so may not be complete.
1 Association of British Insurers (FRA0017)
2 Association of Police and Crime Commissioners (FRA0040)
3 Association of Police and Crime Commissioners (FRA0026)
4 CIFAS (FRA0022)
5 City of London Police (FRA0039)
6 City of London Police (FRA0020)
7 Crown Prosecution Service (FRA0016)
8 Darbishire, Mr Adrian (FRA0031)
9 Eastern Region Special Operations Unit (ERSOU) (FRA0010)
10 Eurasian Natural Resources Corporation Limited (FRA0033)
11 FEDORA INVESTIGATIONS (UK) LIMITED (FRA0003)
12 Financial Conduct Authority (FRA0029)
13 Gumtree (FRA0015)
14 HM Revenue and Customs (FRA0036)
15 Home Office (FRA0038)
16 Lancashire Constabulary (FRA0005)
17 Lawson, Mr Roger (Director, Roliscon Ltd) (FRA0014)
18 Maloney, DCI Steven (DCI, Tarian ROCU - South Wales) (FRA0006)
19 McGill, Gregor (Director of Legal Services, Crown Prosecution Service) (FRA0042)
20 Meta (FRA0041)
21 National Economic Crime Centre / National Crime Agency (FRA0027)
22 Peters & Peters Solicitors LLP (FRA0028)
23 ROCUWM (FRA0024)
24 Serious Fraud Office (FRA0021)
25 Shuttleworth, Chief Inspector John (Chief Inspector, Devon and Cornwall Police) (FRA0008)
26 Slyman, Mr Stuart (FRA0013)
27 The Victims’ Commissioner for England and Wales (FRA0011)
28 The Bar Council (FRA0030)
29 Victim Support (FRA0018)
30 West Midlands Police and Crime Commissioner (FRA0035)
List of Reports from the Committee during the current Parliament
All publications from the Committee are available on the publications page of the Committee’s website.
Session 2022–23
|
Number |
Title |
Reference |
|
1st |
Women in Prison |
HC 265 |
|
2nd |
Pre-legislative scrutiny of the draft Victims Bill |
HC 304 |
|
3rd |
IPP sentences |
HC 266 |
|
4th |
Fraud and the Justice System |
HC 12 |
|
1st Special |
Court capacity: Government Response to the Committee’s Sixth Report of Session 2021–22 |
HC 548 |
|
2nd Special |
Covid-19 and the criminal law: Government Response to the Committee’s Fourth Report of Session 2021–22 |
HC 644 |
|
3rd Special |
The Future of Legal Aid: Updated Government Response to the Committee’s Third Report of Session 2021–22 |
HC 698 |
Session 2021–22
|
Number |
Title |
Reference |
|
1st |
The Coroner Service |
HC 68 |
|
2nd |
Rainsbrook Secure Training Centre |
HC 247 |
|
3rd |
The Future of Legal Aid |
HC 70 |
|
4th |
Covid-19 and the criminal law |
HC 71 |
|
5th |
Mental health in prison |
HC 72 |
|
6th |
Court capacity |
HC 69 |
|
1st Special |
The future of the Probation Service: Government Response to the Committee’s 18th Report of 2019–21 |
HC 475 |
|
2nd Special |
Rainsbrook Secure Training Centre: Government Response to the Committee’s Second Report of 2021–22 |
HC 565 |
|
3rd Special |
The Coroner Service: Government Response to the Committee’s First Report |
HC 675 |
|
4th Special |
The Future of Legal Aid: Government Response to the Committee’s Third Report |
HC 843 |
|
5th Special |
Mental health in prison: Government Response to the Committee’s Fifth Report |
HC 1117 |
Session 2019–21
|
Number |
Title |
Reference |
|
1st |
Appointment of Chair of the Office for Legal Complaints |
HC 224 |
|
2nd |
Sentencing Council consultation on changes to magistrates’ court sentencing guidelines |
HC 460 |
|
3rd |
Coronavirus (COVID-19): The impact on probation services |
HC 461 |
|
4th |
Coronavirus (Covid-19): The impact on prisons |
HC 299 |
|
5th |
Ageing prison population |
HC 304 |
|
6th |
Coronavirus (COVID-19): The impact on courts |
HC 519 |
|
7th |
Coronavirus (COVID-19): the impact on the legal professions in England and Wales |
HC 520 |
|
8th |
Appointment of HM Chief Inspector of Prisons |
HC 750 |
|
9th |
Private prosecutions: safeguards |
HC 497 |
|
10th |
Sentencing Council consultation on sentencing guidelines for firearms offences |
HC 827 |
|
11th |
Sentencing Council consultation on the assault offences guideline |
HC 921 |
|
12th |
Children and Young People in Custody (Part 1): Entry into the youth justice system |
HC 306 |
|
13th |
Sentencing Council: Changes to the drugs offences definitive guideline |
HC 751 |
|
14th |
Appointment of the Chair of the Independent Monitoring Authority |
HC 954 |
|
15th |
Appointment of the Chief Inspector of the Crown Prosecution Service |
HC 955 |
|
16th |
Children and young people in custody |
HC 922 |
|
17th |
Rainsbrook Secure Training Centre |
HC 1266 |
|
18th |
The future of the Probation Service |
HC 285 |
|
1st Special |
Prison Governance: Government Response to the Committee’s First Report of Session 2019 |
HC 150 |
|
2nd Special |
Court and Tribunal Reforms: Government Response to the Committee’s Second Report of Session 2019 |
HC 151 |
|
3rd Special |
Transforming Rehabilitation: Followup: Government Response to the Committee’s Nineteenth Report of Session 2017–19 |
HC 152 |
|
4th Special |
Coronavirus (COVID-19): The impact on probation systems: Government Response to the Committee’s Third Report |
HC 826 |
|
5th Special |
Coronavirus (Covid 19): The impact on the legal professions in England and Wales: Government Response to the Committee’s Seventh Report |
HC 898 |
|
6th Special |
Ageing prison population: Government Response to the Committee’s Fifth Report |
HC 976 |
|
7th Special |
Court and Tribunal reforms: Further Government response to the Committee’s Second Report of Session 2019 and Coronavirus (Covid-19): The impact on courts: Government response to the Committee’s Sixth Report of Session 2019–21 |
HC 1008 |
|
8th Special |
Coronavirus (Covid-19): The impact on prisons: Government Response to the Committee’s Fourth Report of Session 2019–21 |
HC 1065 |
|
9th Special |
Children and Young People in Custody (Part 1): Entry into the youth justice system: Government Response to Committee’s Twelfth Report of Session 2019–21 |
HC 1185 |
|
10th Special |
Private prosecutions: safeguards: Government Response to the Committee’s Ninth Report |
HC 1238 |
|
11th Special |
Children and Young People in Custody (Part 2): The Youth Secure Estate and Resettlement: Government Response to the Committee’s Sixteenth Report of Session 2019–21 |
HC 1357 |
Footnotes
1 CPS.gov.uk, Fraud and economic crime
2 HM Government, Economic Crime Plan: Statement of Progress, July 2019-February 2021, April 2021, page 4
4 Action Fraud, Annual Assessment Fraud Crime Trends 2020/21
5 Office for National Statistics, Crime in England and Wales: year ending March 2021, 22 July 2021
6 Over 40 million targeted by scammers as the cost-of-living crisis bites - Citizens Advice
7 Action Fraud, Annual Assessment Fraud Crime Trends 2019/20; Action Fraud, Annual Assessment Fraud Crime Trends 2020/21
8 Wayne Stevens, National Fraud Lead at Victim Support, Q2
10 Economic Crime Plan, 2019 to 2022, July 2019, Economic Crime Plan, 2019 to 2022, accessible version - GOV.UK (www.gov.uk), para 1.3
12 HMICFRS, Fraud: Time to choose – An inspection of the police response to fraud, 2 April 2019
18 Gregor McGill (Director of Legal Services at Crown Prosecution Service) (FRA0042)
19 Crown Prosecution Service (FRA0016)
20 Gov.uk, Beating crime plan
21 Gov.uk, Beating crime plan, page 3
23 The Victims’ Commissioner for England and Wales (FRA0011)
24 Lancashire Constabulary (FRA0005), CIFAS (FRA0022)
25 Association of British Insurers (FRA0017)
27 Adrian Darbishire KC (FRA0031)
31 DCI Steven Maloney (DCI at Tarian ROCU - South Wales) (FRA0006)
33 Devastating emotional impact of online scams must force government action - Which? News, 10 March 2021
38 Who suffers fraud? Understanding the fraud victim landscape, Victims’ Commissioner, October 2021, page 32
43 West Midlands Police and Crime Commissioner (FRA0035)
44 HM Government, Economic Crime Plan: Statement of Progress, July 2019-February 2021, April 2021, page 34
48 Eastern Region Special Operations Unit (ERSOU) (FRA0010)
49 West Midlands Police and Crime Commissioner (FRA0035)
50 HMICFRS, A review of ‘Fraud: Time to choose’, August 2021, page 3
55 Action Fraud, Annual Assessment Fraud Crime 2020/21
56 City of London Police (FRA0020)
63 Action Fraud, Fraud Crime Trends 2019–20
65 Serious Fraud Office (FRA0021)
66 HM Government, Economic Crime Plan: Statement of Progress, July 2019-February 2021, April 2021, page 18
68 City of London Police (FRA0020)
69 National Economic Crime Centre / National Crime Agency (FRA0027)
71 West Midlands Police and Crime Commissioner (FRA0035)
72 West Midlands Police and Crime Commissioner (FRA0035)
73 SFO.gov.uk, About us
74 Action Fraud, Annual Assessment Fraud Crime Trends 2020/21
76 Chief Inspector John Shuttleworth (Chief Inspector at Devon and Cornwall Police) (FRA0008)
77 Eastern Region Special Operations Unit (ERSOU) (FRA0010)
80 City of London Police (FRA0039)
82 HMICFRS, A review of ‘Fraud: Time to choose’, August 2021, page 3
83 See, for example, Stuart Slyman, City of London Police (FRA0020), Lancashire Constabulary (FRA0005)
85 Association of Police and Crime Commissioners (FRA0026)
87 Fraud surged by 24% under Covid. Now a new study reveals around 700,000 victims a year are likely to be highly vulnerable to fraudulent crime and seriously harmed by it - Victims Commissioner
88 Fraud Act 2006 and Digital Fraud Committee, Fraud Act 2006 and Digital Fraud, 24 February 2022, Q4
91 Eastern Region Special Operations Unit (ERSOU) (FRA0010)
94 Commander Clinton Blackburn, Q35
99 Commander Clinton Blackburn, Q38
100 Commander Clinton Blackburn, Q38
103 Gregor McGill (Director of Legal Services at Crown Prosecution Service) (FRA0042)
104 Crown Prosecution Service, Economic Crime Strategy 2025, 30 March 2021
105 Crown Prosecution Service (FRA0016)
106 Crown Prosecution Service (FRA0016)
107 Gregor McGill (Director of Legal Services at Crown Prosecution Service) (FRA0042)
110 City of London Police (FRA0020)
111 DCI Steven Maloney (DCI at Tarian ROCU - South Wales) (FRA0006)
113 Gregor McGill and Mark Fenhalls KC, Q119
115 Eastern Region Special Operations Unit (ERSOU) (FRA0010)
116 Serious Fraud Office (FRA0021)
117 Association of Police and Crime Commissioners (FRA0026)
118 See, for example, Eastern Region Special Operations Unit (ERSOU) (FRA0010), City of London Police (FRA0020), Serious Fraud Office (FRA0021)
120 Justice Committee, The Work of the Serious Fraud Office, 29th March 2022, Q46
123 City of London Police (FRA0020)
124 City of London Police (FRA0020)
128 Gov.uk, Review of the efficiency and effectiveness of disclosure in the criminal justice system, 15 November 2018
130 Serious Fraud Office (FRA0021)
131 Lancashire Constabulary (FRA0005)
132 HM Revenue and Customs (FRA0036)
133 Gregor McGill (Director of Legal Services at Crown Prosecution Service) (FRA0042)
134 Justice Committee, Third Report of Session 2021-22, The Future of Legal Aid, HC 70, page 22
135 Gov.uk, Response to Independent Review of Criminal Legal Aid, 20 July 2022
136 Sentencing Council, Fraud, Bribery and Money Laundering Offences - Definitive Guideline, pages 5-13
137 City of London Police (FRA0020)
138 Association of Police and Crime Commissioners (FRA0026)
139 City of London Police (FRA0020)
143 Association of Police and Crime Commissioners (FRA0026)
150 Luke Taylor, Q166, Lulu Freemont, Q168
156 Association of British Insurers (FRA0017)
160 See Gregor McGill (Director of Legal Services at Crown Prosecution Service) (FRA0042), Serious Fraud Office (FRA0021), National Economic Crime Centre / National Crime Agency (FRA0027)
162 Justice Committee, The Work of the Serious Fraud Office, 29th March 2022, Q85
163 Law Commission, Corporate Criminal Liability: an options paper, 10 June 2022, page 247
166 Mr Adrian Darbishire (FRA0031)
171 A Specified anti-fraud organisation is defined in Section 68 of the Serious Crime Act 2007 as “any unincorporated association, body corporate or other person which enables or facilitates any sharing of information to prevent fraud or a particular kind of fraud or which has any of these functions as its purpose or one of its purposes”.
172 HM Government, Economic Crime Plan: Statement of Progress, July 2019-February 2021, April 2021, page 26
174 City of London Police (FRA0039)
181 For a full record of interests in relation to this inquiry see the formal minutes for the inquiry pertaining to meetings on 22 February 2022, 15 March 2022, 22 March 2022, and 20 April 2022