Interview with Ros Wright

UK's Resolute Fraud-Fighting Advisor


By Dick Carozza

 

After successfully fighting fraud within the UK government, Ros Wright now independently advises, drives new research, and gives her unvarnished opinions as chair of a watchdog group. And people listen.

When Ros Wright’s five-year term as director of the UK’s Serious Fraud Office was about to end, the government did an unusual thing: it asked her to stay another year. Fraud convictions were up and the SFO’s reputation had improved.

But now Wright has moved from the core of government to become an outside advisor and critic. As chairman of the independent UK Fraud Advisory Panel, she manages volunteer anti-fraud experts who want to raise awareness of fraud in society and develop effective remedies. Her previous government jobs help her make informed judgments about the UK’s fraud-fighting strategies; officials listen to her because of her successes.

Wright is quick to laud when kudos are due but doesn’t hesitate to be forthright when she sees problems that should be fixed. She called the UK government’s report of fraud-fighting plans, the 2006 Fraud Review, “groundbreaking, exciting and constructive.” But in March of 2007, she said the government’s funding response to the plan was “very disappointing.” The Fraud Advisory Panel said that there were no pledges of new resources for local police “fraud squads” or of legislation, and no firm action timetable.

“Fraud has a devastating effect on individuals, businesses, communities, and the British economy as a whole,” she said at the time. “Yet the Government is not prepared to commit the £27 million per year the Review suggests is required to implement its recommendations for targeted policing and other measures.”

For her resolute, lifelong fight against fraud and its causes, the ACFE has presented Wright the 2007 Cressey Award.

The award is named in honor of one of the country’s foremost experts on fraud, Donald R. Cressey (1919 – 1987), and a founding father of the ACFE.

Ros Wright spoke to Fraud Magazine from her office in London.

Who and what prompted the formation of the Fraud Advisory Panel? 

The Panel was established in 1998 through a public-spirited initiative by the Institute of Chartered Accountants in England and Wales originally to raise the awareness of accountants to the dangers of fraud in companies, which they audited and advised. Today, it is a registered charity and company limited by guarantee in England and Wales.

The Fraud Advisory Panel aims to raise awareness of the immense social and economic damage caused by fraud and to help the private and public sectors, and the public at large, to fight back.

The Panel works to originate proposals to reform the law and public policy on fraud; develop proposals to enhance the investigation and prosecution of fraud; advise business as a whole on fraud prevention, detection, and reporting; assist in improving fraud-related education and training in business and the professions, and amongst the general public; and establish a more accurate picture of the extent, causes, and nature of fraud.

Members of the Fraud Advisory Panel include representatives from the law and accountancy professions, industry associations, financial institutions, government agencies, law enforcement, regulatory authorities, and academia.

The Panel works to encourage a truly multi-disciplinary perspective on fraud. No other organization has such a range and depth of knowledge, both of the problem and of the means to combat it. The Panel is funded by subscription, donation and sponsorship.

The Panel, which defines itself as a watchdog group, appears to be unique because it’s established by a professional organization. Was it modeled after similar groups from other countries? 

As far as we know, the Panel is unique! It is independent of government and of any vested interests. It does not claim to represent any person or body, other than all those interested in the prevention, detection, and deterrence of fraud. It is made up of individuals with a particular expertise and, in most cases, years of experience in fighting fraud in all its guises.

Can you describe some of the Panel’s research projects? 

The Panel commissions and/or endorses research into the nature, extent and causes of fraud. Previous research has included cyber crime, indications of fraud in SMEs [small and medium enterprises], the nature and extent of fraud, and data protection.

Some of our recent achievements include completing research into perceptions on the impact of data protection legislation on the successful private sector investigation of fraud and convening a groundbreaking expert seminar on victims of fraud. We’ve published the findings of the seminar in the panel’s first occasional paper. Both of these projects are parts of an ongoing objective to explore the wider human and social impact of fraud.

We’ve also commissioned and organized other research projects such as “Indications of Fraud in SMEs,” [Dr. Andrew Higson, 2002] – which focuses on employee and third-party fraud – “Cybercrime Survey 2001” [FAP, CBI, ArmorGroup & PricewaterhouseCoopers], and “Why is Management Reticent to Report Fraud? An Exploratory Study,” among many others.

We’ve done groundbreaking work in a number of fraud-related areas such as “Disclosure of Death Registration Information,” [Investigation, Prosecution & Law Reform Working Group, March 2007] “New Powers Against Organised and Financial Crime,” [I&P Serious Organised Fraud Subgroup, October 2006] and “The Immediate Steps Government Could Take to Combat Identity Fraud.” [Steven Philippsohn, May 2006]

What are the best reasons for organizations and businesses to fight fraud in the UK? 

Self-protection and avoidance of systemic damage to markets and sectors. Our law enforcement agencies are hard-pressed and understaffed, particularly in the area of financial investigation. The more that individual businesses and financial institutions can do to prevent and deter fraud in their own areas, the more likely it is that fraud will be reduced. Once fraud occurs, the professionalism with which institutions and businesses carry out their own internal investigations, with the help of internal and external expertise, the more likely the police are to accept a complaint for criminal investigation.

What are the costs of fraud in the UK besides financial? 

The economic cost of fraud in the UK is estimated, in the latest research conducted for the Association of Chief Police Officers and Home Office in March 2007, at 13.9 billion GBP. That is UK-speak for what you would recognize as £13,900,000,000. This figure does not include fraud on the revenue or EU-related fraud, which impacts on our taxpayers; this brings the total economic cost up to £20,000,000,000 a year. In addition, there is the risk of systemic damage to a market or sector, impacting on consumer confidence and consequent loss of trade.

In addition, fraud severely affects individuals through its effect on loss of funds – sometimes an individual’s entire life savings, loss of pension, loss of job, and employment prospects, and on the reputation of both individuals and on the business affected. Family life suffers; many victims find their marriages and relationships suffer, sometimes irrevocably. In some cases, victims who suffered major losses have committed suicide.

What are the similarities among frauds in the UK and the U.S.? What are the differences? 

I suspect the nature of fraud in the U.S. and the UK is fairly similar, though there seems to be a greater experience of financial statement fraud in the U.S. and until recently, a more heavily pronounced emphasis on pump-and-dump-type frauds. However, we have seen a recent increase in boiler-room frauds in the UK, not dissimilar to pump-and-dump and these are worrying law enforcement agencies over here.

Identity theft appears to be a growing fraud in the UK. What are the prevalent schemes? What are other growing frauds in the UK? 

Identity fraud certainly has received prominent press coverage; though it is not the most prevalent fraud in the UK. Asset misappropriation by employees easily outstrips any other form of fraud. It is a growing form of fraud and perpetrated on individuals and on businesses as well with corporate identity theft a poorly recognized business risk. There are several MOs in use at the moment over here, all directed at hijacking identities of individual or businesses. These include cases of false identity, identity theft, account takeover and other impersonation situations.

Application fraud and false insurance claims relate to applications or claims with material falsehood or false supporting documentation where the name has not been identified as false.

Facility takeover occurs when a person (the facility hijacker) unlawfully obtains access to details of the victim of takeover, namely an existing account holder or policy holder (or of an account or policy of a genuine customer or policy holder) and fraudulently operates the account or policy for his (or someone else’s) benefit.

Misuse of facility is when an account, policy or other facility is used fraudulently.

Asset conversion relates to the sale of assets subject to a credit agreement when the lender retained ownership of the asset, for example a car or a lorry.

Corporate identity theft includes phishing, in which the victim’s Web site is copied and pharming, when the customer is directed to a false Web site purporting to be that of his or her service provider.

Corporate identity theft also includes registering false details about the corporate entity at Companies House, the registration office for all companies incorporated in the UK, such as the company’s registered address or its officers.

Other growing frauds in the UK include boiler-room share pushing of stock in non-existent or unlisted companies, advance fee frauds, and high-yield investment scams.

How serious is money laundering in the UK and what are some of the typical schemes? Do most of these schemes cross borders and span the globe? 

Given that money laundering is a concealed activity that occurs outside of the normal sphere of economic statistics, it is difficult to estimate the exact scale of the problem in the UK. In 2003, HM Customs & Excise figures estimated that, annually, around £25 billion of criminal money might be available for money laundering in the UK; yet, more recently, figures such as £15 billion and £20 billion have been used to value the total quantified crime market.

The Financial Action Task Force [FATF] has declined to publish any figures. However, the International Monetary Fund stated in 1996 that the aggregate size of money laundering in the world could be somewhere between two percent and five percent of the world’s gross domestic product. According to FATF, using 1996 statistics, these percentages would indicate that money laundering ranged between US$590 billion and US$1.5 trillion.

Money launderers have shown themselves to be exceptionally creative in creating new schemes to evade a particular government’s countermeasures and large-scale money laundering schemes invariably contain cross-border elements. These schemes vary in complexity, may involve any number of intermediaries, and utilize both traditional and non-traditional payment systems, offshore financial centers and overseas companies, non-financial sectors, and the international trade system, according to the FATF.

What can U.S. fraud examiners learn from UK fraud examiners and vice versa? 

Our fraud “examiners” – we usually term them investigators or fraud-risk managers – are usually employed within companies to advise on fraud risk, how to identify it within the company, and how to manage it. When employed externally and brought in as consultants, they advise on fraud protective measures and deterrence and generally to devise anti-fraud policies within a company, which includes such issues as how to investigate a fraud when it occurs, how to liaise with law enforcement, and how to manage damage limitation when publicity threatens the company.

Most of our fraud investigators, other than those employed by law enforcement, are qualified as forensic accountants or, in some cases, are private detectives, with lengthy financial investigative experience. Many are now qualified as certified fraud investigators, having taken extensive training courses – up to three years – and sat diploma and degree exams under the auspices of one of several UK universities now offering courses – such as Portsmouth and Teesside Universities.

You have said that the proposals of the UK government’s Fraud Review were groundbreaking. But then you were disappointed with the government’s slow implementation and funding. Can you elaborate? 

The Fraud Advisory Panel’s take on the Fraud Review is that it is a very worthwhile project, which we warmly support and one which will bring a very real improvement in the way in which fraud is tackled in the UK. To achieve the excellent aims of the Review, it will be vital that the Home Office plays a central role in making fraud and financial crime a major priority for policing and set performance indicators related to the investigation of fraud for all police forces. We also expect the Home Office to make its own firm commitment to providing adequate resources for the policing of financial crime.

Although the attorney general has given a personal commitment to ensuring adequate funds are available to implement the new proposals, there has been no firm commitment to providing the full £27 million required to implement all of the Fraud Review’s recommendations. The Home Office is ultimately responsible for funding these initiatives and to date has made no public commitment to do so.

We also believe that the proposed program lacks a sense of urgency. Firm proposals may be expected by the end of the year for the establishment of the National Fraud Reporting Centre, but this does not constitute a timetable for implementing the entire Fraud Review package. This could take much longer or be put on hold for an indefinite period; at this stage we just simply do not know how long it will take.

The Panel has said the government hasn’t pledged any new resources for police department fraud squads or devised a firm timetable for action. What should new fraud squads look like? What kind of timetable would you like to see? 

The number of specialist, trained police officers in police forces outside the City of London is fewer than 400, about half the number who were so employed about eight years ago. The Fraud Review’s proposals are that the City of London Police, who already have responsibility as lead force, supporting the local police in the southeast of England, from Norfolk in the north to Hampshire in the south, in the area of financial crime investigation, should assume this role for the 43 separate police forces throughout the UK. This is a very ambitious project and one that will require the recruitment of a large number of extra officers who will need specialist training and support in the area of financial crime investigation. We would like to see first a commitment of funding for recruitment and for training. Once this is in place and adequate numbers of police officers are in place, their deployment as and where required can be planned.

The government’s Fraud Review admitted that lack of resources meant that many fraud reports are either not accepted at police stations or go uninvestigated including cases involving organized crime and possible terrorist connections. How serious are these problems?  

It is obviously very worrying that because of lack of clear priorities set for the police in the area of financial crime, many police forces do not accept, with the readiness one would reasonably expect, reports of serious fraud, including those where organized crime is suspected. However, I think it is unlikely that if terrorist connections are suspected, reports would not be taken seriously and pursued. I know of no instance where this has happened. Because we are talking about a negative issue – the absence of accepted reports of fraud – it is impossible to give any figures. All information available is anecdotal but it is a well-recognized problem and one that individuals and trade associations, such as the Association of British Insurers and the British Bankers’ Association, have complained about for some time.

What are some ways the investigative and judicial systems can hasten the UK fraud prosecution process? 

As far as the investigative process is concerned, more investigators would certainly speed up the process! Better investigation plans and concentration on core issues rather than the “total picture of criminality,” which is a major consideration in the view of some investigators, would also shorten investigation times.

As far as the trial process is concerned, the Fraud Review itself has some useful pointers: a move towards a formalized plea negotiation system, similar though not necessarily identical to that prevalent in the U.S. would be a useful way forward. In addition, better and firmer trial management by our judges would also shorten trials. There have been several attempts to replace juries in the most lengthy and complex fraud trials with a tribunal consisting of a judge sitting alone, or with specialist assessors. But this proposal has met with a great deal of opposition from both parliamentarians (in our Upper House) and from the legal profession and successive bills to reform the law in this area have been thrown out by the House of Lords.

The Panel has questioned the supposition that only “vulnerable” individuals such as the elderly or less educated are most likely to become fraud victims. Can you elaborate? 

Not only the Panel, but also the Office of Fair Trading in a recent research project has found that, on the contrary, it is the middle-class, middle-aged and younger, better educated members of the public who are more likely to become the victims of some forms of fraud, including identity fraud and investment scams. They are the ones with money to invest and most to lose.

The UK has various anti-fraud laws. Is there one act that is comparable to the U.S. Sarbanes-Oxley in scope? 

We do not have an equivalent to Sarbanes Oxley nor do we reckon there is an equivalent need for such legislation in the UK at the moment. Our accounting laws and regulations are tighter than those in the States and we have not faced the same problems with regard to financial statement fraud that the U.S. has.

The Panel has said that investigation and prosecution of serious fraud is being hampered by “bad law, which frustrates the needs of justice.” What do you think must be done? 

This refers specifically to our disclosure requirements in relation to unused material in criminal trials, which are cumbersome and unsuited to the demands of fraud trials. There are gigabytes of unused material that must be sifted by the prosecution and disclosure made to the defense of any material which could undermine the prosecution case or assist the defense. We would prefer to move towards the U.S. model, where the onus is on the defenses to identify the documents or material in the prosecution’s possession which they wish to assist their case, not the other way round.

What are your thoughts about the UK’s Fraud Act 2006? 

It will make the prosecution’s task infinitely easier and the jury will be relieved of the burden of understanding such arcane terms as “procuring the execution of a valuable security by deception.” The Fraud Act makes it an offense to commit fraud by dishonest misrepresentation, by failure to disclose something that ought in law to be disclosed and by abuse of fiduciary duty. The emphasis is on the intent of the offender, rather than the effect on the victim. This means that the prosecution will not have to elicit evidence from a victim as to what operated on his mind when he parted with money to the offender, merely what the offender’s dishonest intention was. This will create a much more flexible offense.

UK fraud penalties are much less severe than those in the United States. The UK Fraud Act 2006 mandates the maximum penalty at 10 years; some high-profile corporate U.S. fraudsters have received twice that amount. Can you explain the reasons for the differences? What is the Fraud Advisory Panel’s view of the efficacy of long prison sentences in deterring fraud? 

UK law has historically, at least since the beginning of the 20th century, not punished crimes of dishonesty by more than a maximum sentence of some eight to 10 years. Few offenders are sentenced to the maximum and first offenders usually serve their prison sentence in an “open” prison, with less restriction than conventional prisons. The rationale is that these are, on the whole, white-collar crimes, where the offender is predominantly a professional or business person and the shock of arrest and criminal trial itself is deterrent enough and further punishment, by way of a prison sentence, is almost unnecessary. This creates an impression that the courts do not take financial crime as seriously as they do crimes of violence.

The Panel has no agreed view on the optimum length of sentence, though we do say that very low sentences are an insult to victims; fraud should be taken seriously by law enforcement and by the courts and the interests of the victim should be paramount. We would like to see more emphasis on compensation for victims of financial crime and greater use made of confiscation of the proceeds of crime generally, perhaps being put toward a fund set up to compensate victims. The loss of money amassed dishonestly is a very real deterrent to most criminals who are, after all, in the business of fraud only for financial gain.

Do you see more of an emphasis in UK entities – both public and private – to train accountants in fraud examination skills? 

There has been an increase in the numbers of forensic accountants specializing in fraud investigation and asset recovery. On the whole, entities, such as corporations, do not train their own forensic accountants but employ outside firms of accountants with specialist forensic skills as and when they need them.

The ACFE, begun by Joseph Wells in 1988, now has more than 40,000 members in 125 countries. Wells has written much of the seminal material that appears in the ACFE's training events and publications. In the relatively short time that the ACFE has existed, what do you see as some of Wells' and the Association's effects on anti-fraud efforts? 

Providing a forum for anti-fraud professionals to meet, to discuss common experience, and develop improved methods to fight financial crime has and will continue to encourage a more professional approach to fighting fraud and will improve the effectiveness of anti-fraud strategies and tools.

We often run articles in Fraud Magazine on fraud in small businesses, which are uniquely vulnerable to fraud. What does the Panel recommend for these businesses? 

We have a special publication for small- and medium-size enterprises and how they can protect themselves against fraud. You can access it on our Web site. [See www.fraudadvisorypanel.org/newsite/PDFs/advice/FightingFraud2ndEdition.pdf]

The UK has a growing local ACFE chapter geared specifically toward the interests of the UK anti-fraud practitioner and the ACFE has plans for future expansion. Members work in both the public and private sectors. How can a professional association such as the ACFE benefit fraud investigators in addition to the fine training they already receive through university diploma and degree programs? 

The strength of the ACFE and its unique “selling point” is the ongoing support it offers to its members. By attending training seminars and following ACFE guidance, members will be able to improve their skills in a very practical way. The networking opportunities offered by the ACFE puts anti-fraud professionals in touch with their peers and colleagues locally and globally. These opportunities include seminars, conferences, online discussion forums, local chapter events, e-newsletters and more. In this way, the ACFE members can share insights and ideas with fellow anti-fraud professionals, anywhere in the world.

What improvements need to be made to further greater cooperation among global anti-fraud governmental agencies? 

This question raises enormous issues that deserve a separate article! Suffice it to say that there is far greater understanding and cooperation now than at any time in the past between national anti-fraud agencies. The problems of disparities between jurisdictions, the problems relating to the absence of mutual legal assistances treaties and extradition agreements between individual countries and differing laws relating to banking secrecy are slowly diminishing. The more these questions can be discussed and greater awareness raised of the mutual benefit, which is derived from a common approach in these areas, the better for the fight against financial crime.

Can you explain your duties as chair of the Supervisory Committee of OLAF?  

I chair a small board of experts from five separate member states of the EU who monitor the operational activities of OLAF, the European Anti-Fraud Office, to ensure its effectiveness and its independence.

What do you see as some emerging fraud trends around the globe?  

The trend worldwide is not dissimilar from those domestic frauds encountered in the U.S. and the UK. There is an increasing incidence of fraud perpetrated by professional gangs and this is a major concern of most anti-fraud agencies. OLAF has an extremely good track record in combating this type of professional fraud, particularly in the area of cigarette smuggling, which impacts in terms of billions of euros on the EU budget.

You’ve had a rich professional life and you’re still contributing. At the end of the day, what gives you the most satisfaction? 

Hoping I’ve made a difference. 

Dick Carozza is editor of Fraud Magazine. 

  

The Association of Certified Fraud Examiners assumes sole copyright of any article published on www.fraud-magazine.com or www.ACFE.com. ACFE follows a policy of exclusive publication. Permission of the publisher is required before an article can be copied or reproduced. Requests for reprinting an article in any form must be e-mailed to: FraudMagazine@ACFE.com.  

 

 

 

 






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