'Govt fraud strategy must be flexible to get ahead of scammers'

Statistics show that the cases of fraud have escalated in recent years and now fraud is 40 per cent of all crime committed in the UK.

That statistic is likely to be understated, given that some victims of fraud do not report their cases to the police or at all. Their reluctance to report may be due to being embarrassed or worried about reputational damage or thinking that nothing will be done. 

Before getting into the specifics of the fraud strategy, it is worth noting that there are different types of fraud.

Fraud can be grouped into three main categories: scams (romance, investment, authorised push payments); financial statement and reporting fraud; and asset misappropriation/theft. 

The increasing incidence of fraud can be attributed, at least in part, to the low conviction rates for such crimes.

Most of the government's fraud strategy is focused on taking action to shut down scams and protect victims of those scams.

While this is an area of fraud that has been increasing, there have been increases in all types of fraud in recent years and there are different drivers for the different types of fraud.

There are separate steps being taken to combat these other types of fraud, including the 'failure to prevent' offence as part of the economic crime bill, which is currently making its way through parliament. 

Taking aim at scams does make sense as the proceeds of scams earned by the fraudsters are now in the billions annually.

Increasingly, scams are being committed by organised criminal gangs. Those gangs then use the proceeds of those scams to finance further fraud schemes as well as other more serious crimes, including terrorism and modern slavery.

The increasing incidence of fraud can be attributed, at least in part, to the low conviction rates for such crimes. This has created an impression that engaging in fraud is a lucrative endeavour, further fuelling its proliferation.

Many of these gangs operate from outside the UK but target UK-based victims.

Therefore, it is often difficult for UK law enforcement to identify those perpetrators and pursue those fraudsters to bring them to justice without a strong partnership with international partners to both share information and work together.

The fraud strategy does not go nearly far enough.

Another factor fuelling this rise is the ease with which a company can be established in the UK. It only takes a few minutes to register a company with Companies House without the person registering it providing any proof of who they are.

These factors and others, including the UK's faster payment system, have created the perfect environment for fraud to flourish. 

Swift, decisive and committed action needs to be taken to tackle the rising tide. A comprehensive strategy that brings together the public and private sector was needed to underpin and drive that action. The fraud strategy does introduce a number of useful steps.

However, the fraud strategy does not go nearly far enough. And the objective to deliver a 10 per cent cut in fraud on 2019 levels by the end of December 2024 is not ambitious enough given that cases of frauds continue to rise.

Fraud prevention service CIFAS reported that cases of fraudulent conduct reported to the National Fraud Database in 2022 were 12 per cent higher than pre-pandemic. 

The government's fraud strategy includes actions in three main areas: pursue fraudsters, block the fraudsters and empower the public. 

As part of the first pillar to pursue fraudsters, the government is proposing to create a new fraud squad with the National Crime Agency and the City of London Police, which will comprise 400 new professionals.

This is a welcome investment, however the issue in the past with prosecuting fraudsters has not only been about having enough resources. Those resources have to be able work within a framework that allows them to pursue the fraudsters.

Whatever the government does to combat fraud will likely have a response from the fraudsters to shift and change their focus.

The government has promised a new independent review into the challenges of investigating and prosecuting fraud. This will be the first review like this since 1986, so it is well overdue and would have been useful to have already been done to inform this strategy.

Judging from previous similar reviews, this review will take some time and the findings will need to be embedded into this strategy to ensure these additional resources are deployed effectively. 

In an effort to block fraudsters, the government is proposing to work with technology and telecommunications companies more closely to disrupt the means by which the fraudsters contact their victims.

This is a step in the right direction, given that most scams are now perpetrated through these platforms.

One of the proposals in this fraud strategy is to allow victims to report incidents of fraud on those platforms when it happens.

What is lacking is detail regarding how this intelligence can be shared more widely, including with law enforcement and other companies to protect other victims and allow a quick response. 

Fraud is committed in countless ways and is ever-evolving and changing. The criminals who perpetrate it are constantly looking for weaknesses that can be exploited.

Whatever the government does to combat fraud will likely have a response from the fraudsters to shift and change their focus.

The fraud strategy needs to be as agile as our opponents if we stand a chance of reversing this trend. 

Rachel Sexton is partner and head of Ashurst Risk Advisory