Despite their arguments that crime has been cut by 14 per cent since the prime minister took office, there is no hiding from the truth that fraud is on an exponential rise.
Undoubtedly, the truth is far less flattering, with the latest records proving that fraud actually increased by 47 per cent between September 2020 and September 2021. A truly alarming figure, which tells us that the government’s current approach to tackling fraud is in dire need for a systemic overhaul.
A major shortcoming in the government’s counter-fraud strategy is that they are simply channeling resources into the wrong areas. There has been too much emphasis on back-end enforcement, meanwhile the bodies on the frontline tasked with the policing of and catching potential fraud are being starved of resource. The result of this imbalance is unfortunately all too clear to see in the worryingly high statistics of the past two years.
Limitations of back-end enforcement
In an attempt to take a harder line against fraud, the government has recently introduced a new economic crime levy with the aim of stemming this rise in fraud cases.
The levy will apply to medium and large businesses that are subject to money laundering regulations and will seek to raise additional funding for the government’s efforts to clamp down on serious fraud.
While the levy brings with it an increase in funding to tackle fraud, it could fundamentally prove inconsequential unless the government takes greater care as to where these resources are placed.
As it stands, all too often fraudsters are not getting caught or prosecuted because the front-end operation is overstretched. Yet, in its current form, the levy does nothing to address this issue.
Rather, under the current plans, the majority of the funding will be directed towards back-end enforcement and increasing the number of accredited financial investigators. This is where the government must change its approach, and it must reconsider where its priorities lie.
The primary function of a financial investigator is to step in once an investigation has started, or if a case has been finalised and the process of confiscation is underway. As such, without further resources at the coalface and on front-line enforcement, there is limited value in pouring additional resource into this area.
Resources at the coalface
As it stands, fraud is a risk-free game. In the current climate, very few fraudsters get investigated or prosecuted, and this is fundamentally down to the fact that agencies policing fraud are massively underfunded.
Without further support from the government, we can expect fraud to continue on the trajectory it has been on over the course of the pandemic, which in the first quarter of the 2021-22 fiscal year has seen a 66 per cent increase in complaints of scams to the Financial Ombudsman Service compared to the same period last year.
In addressing this issue, the government needs to redirect the funds raised by the economic crime levy towards agencies, such as the Serious Fraud Office and the National Crime Agency. What's more, the government should consider making better use of the National Economic Crime Centre.
Supposedly, local police forces fall under the NECC’s remit, and they have the power to task local forces with policing and investigating fraud. However, the NECC is equally under-resourced and until more funding is deployed here it will continue to struggle to use these powers effectively.
With frontline resource so severely starved of funding, the back-end operation led by financial investigators have in turned been starved of cases to investigate in the first place.
Until this is rectified, fraudsters can carry on operations safe in the knowledge that they are highly unlikely to be caught, and therefore will not be investigated, and so ultimately will not be prosecuted.
Indeed, if the first link in this regulatory chain is too weak to function, then the healthy ones behind cannot function properly either.
Rachel Adamson is director at Adkirk Law
