Crushing fraud in the U.K.

Fraud now accounts for more than 40% of all crime in the United Kingdom. Here we explore what’s behind this proliferation of fraud in England and Wales and what anti-fraud experts say the government must do to crush it.

Last June, British daily newspaper The Daily Mail dubbed the United Kingdom “the fraud capital of the world.” That moniker might be dismissed as a bit of breathless hyperbole from a tabloid, but the House of Commons seconded that sentiment in its March report on fraud when it warned that “the criminal justice system’s current approach to penalising and sentencing fraudsters is insufficient to prevent the U.K. being seen as a haven for fraudsters.” (See “Britain is £3bn fraud capital of the world: Probe reveals 40m Britons have been targeted by scammers this year... but just 2% of our police are investigating the crime plague,” by Tom Kelly, Miles Dilworth, and Victoria Bischoff, The Daily Mail, News, updated June 27, 2022 and “Progress combatting fraud, Forty-Third Report of Session 2022-23,” UK Parliament, March 31, 2023.)

According to the U.K. Parliament report, fraud accounts for 40% of crime in the U.K., and it’s the type of crime that the average citizen of England and Wales is most likely to experience. Almost 7% of adults in the U.K. have either been a victim of fraud or have had a fraud attempt made against them. The U.K. Home Office estimates that the cost of fraud against individuals alone was 4.7 billion pounds last year. But the 2023 Annual Fraud Indicator (AFI), a report put together by Crowe, Peters & Peters and the University of Portsmouth, estimates a much higher cost of fraud. According to the AFI, annual fraud losses in the U.K. could be more than 200 billion pounds this year. (See “Annual Fraud Indicator,” Crowe and U.K. Parliament report.)

That the U.K. has a reputation as a haven for certain types of crime is nothing new — England, and London in particular, has earned a distinction of sorts as money-laundering central for kleptocrats from all over the world. Nor is fraud a particularly new phenomenon for the country, although much of it has arguably gone undetected or ignored for years. What’s different this time is perhaps improvements in how the government and other private entities measure the extent of fraud in the U.K. and the obvious impact on a broad swath of constituents following the COVID pandemic that have made politicians sit up and listen, anti-fraud experts say. (See “One Year on From Russia’s Invasion of Ukraine, How is the U.K.’s Fight Against Kleptocratic Wealth Faring?” by Tom Stocks, Organized Crime and Corruption Reporting Project, Feb. 24, 2023; “Fraud in UK public spending soars under poor oversight – watchdog,” by Andy Bruce, Reuters, March 30, 2023; and “Understanding the rise of fraud in England and Wales through field theory: Blip or flip?” by Mark Button, Branislav Hock, David Shepherd, Paul Gilmour, Journal of Economic Criminology, Volume 1, September 2023.)

“You have rich pensioners, a natural constituency of government, who are losing their life savings, and are completely devastated, and they are angry. ‘Why isn’t anything being done about it? I’ve lost 50,000 pounds and the police haven’t even been around to see me.’ So, there is that anger that has been building up for some time and that eventually makes the government want to take note,” says Mark Button, director of Portsmouth University’s Centre for Cybercrime and Economic Crime, in a Fraud Magazine interview.

Indeed, the U.K. government has taken enough notice of anger among its constituents to formulate a new fraud strategy announced in May. The government says it aims to cut fraud by 10% by 2024, add 400 police officers to investigate fraud, overhaul the U.K.’s current fraud-reporting system for victims and put pressure on technology companies to take a more active role in protecting its customers from fraud. Home Secretary Suella Braverman said the strategy, “Sets out a plan to stop fraud at source and pursue those responsible wherever they are in the world.” (See “UK’s new fraud strategy too weak to tackle soaring crime, say experts,” by Siddarth Venkataramakrishnan, Financial Times, May 3, 2023 and “New blueprint to protect public from scammers,” Home Office, GOV.UK, May 3, 2023.)

But many U.K. anti-fraud experts have expressed skepticism about the government’s latest strategy, saying that the plan isn’t ambitious enough to adequately tackle the spate of frauds currently plaguing Britain. Fraud Magazine interviewed some of these experts for their take on why fraud has become the most common crime in the U.K. and what should be done to fight it.

What gets measured gets done

“Fraud has always been the Cinderella of crimes,” says Tim Harvey, CFE, global chapter liaison for the ACFE and a former detective superintendent of the City of London Police’s Economic Crime Department. “It’s always been the one that never really gets reported, and when it does get reported to the police, they don’t have the resources or experience to investigate it.”

Harvey says investigating financial statement fraud or other types of corporate fraud is a completely different “ball game” from investigating a burglary or a stabbing. That’s because fraud investigations are resource intensive and require a different skill set.

Fraud hasn’t always been top of mind for government and law enforcement officials, but the U.K.’s history of tracking fraud has been uneven at best. Over the years, anti-fraud agencies have come and gone, and critics think existing government departments such as the Serious Fraud Office are in need of serious reform. The National Fraud Authority was formed in response to the U.K.’s 2006 Fraud Act and was meant to tackle fraud and coordinate efforts among various government agencies. But it was disbanded in 2014 when the government created the National Crime Agency in a strategy to focus on economic crime. And the National Crime Survey didn’t ask specific questions about fraud offenses until 2016. (See “National Fraud Authority to close,” by Pat Sweet, Accountancy Daily, Dec. 3, 2013; “Fraud Act 2006,” legislation.gov.uk, The National Archives; and “Crime in England and Wales: year ending Sept 2016,” Office for National Statistics.)

“We have a saying in the U.K.: What gets measured gets done,” says Button. “And the crime survey, which is so crucial in terms of measuring fraud, only started to ask questions about fraud in 2016. Before that they’d ask if you had your car stolen, if you’ve been burgled or assaulted (but nothing on fraud). Because we [now] have accurate measurements, politicians are suddenly confronted with fraud being 40% of crime. That’s a big problem.”

Indeed, the problem is vast, and anti-fraud experts say that the U.K.’s current epidemic of fraud is owed largely to the pandemic and the internet, and specifically, social media platforms. The COVID-19 pandemic, with its influx of government spending and social distancing measures, left many people isolated, alone and online, providing plenty of opportunity and money for fraudsters. Email and social media have made it easier for fraudsters to target people en masse. (See “Suspected fraud flagged on UK COVID-19 loans jumps 43%,” by Iain Withers, Reuters, Sept. 14, 2023.) According to U.K. bank Barclays, 87% of all frauds originate on technology platforms like social media, online marketplaces and dating apps. (See “Eight in 10 Brits feel unsafe on social media due to scammers,” Barclays, Aug. 9, 2023.) And while some experts say the government’s latest initiative is a step in the right direction and indicative of serious change, others think that it’s lacking in several key areas and that the problem of fraud in the U.K. is so immense that the current strategy might not be enough.

A lack of ambition, a lack of resources

Anti-fraud experts tell Fraud Magazine that the government’s initiative falters on its ambitions. Indeed, the goal of reducing fraud by 10% is insignificant when it represents 40% of all crime in the U.K., says Button.

One area where experts say the new strategy falls short is in the number of police and other law enforcement officials dedicated to investigating and preventing fraud. The 400 additional police officers that will come with the government’s new strategy is just insufficient. “While the fraud strategy does create some new roles and has a number of actions related to law enforcement, 400 people is not going to move the dial significantly. It needs a much bigger investment in law enforcement,” Kathryn Westmore, CFE, senior research fellow at the Royal United Services Institute (RUSI) tells Fraud Magazine.

Fraud is not a policing priority, says Harvey. “Commanding officers use their resources to investigate policing priorities, as definied by the Home Secretary, such as violence against women, terrorism and organized crime,” he says. “And until fraud is made a policing priority, it will never get the resources it requires. Of course, now the government has come to realize that it is of epidemic proportions.”

Button, who has also done anti-fraud work in South Korea, says the additional 400 investigators is a starting point but a drop in the bucket compared to the number of police officers dedicated to fraud in other countries.

“We have somewhere between 1,000 to 2,000 specialist police officers in the U.K. dedicated to fraud or who know about fraud. In South Korea, they have 10,000,” he says. “If you put that in context, in our department for work and pensions that deal with Social Security fraud, they have got somewhere between 5,000 to 8,000 staff. And depending on how you define it, they are dealing with just one high-volume fraud that happens to target the government, which is very keen to protect itself. But for the general public and businesses, an extra 400 isn’t going to have a significant impact.”

Anti-fraud experts also express disappointment in how the government is engaging with big tech companies and their social media platforms, where much of the fraud originates. According to Westmore, many experts had hoped that Meta, the owner of Facebook, and other platforms would be on the hook to reimburse customers who’d been defrauded on their platforms. So far, though, the government has yet to impose such incentives to prevent fraud online.

“It’s generally felt that the strategy doesn’t go far enough in either incentivizing or mandating that a lot of these big tech platforms use the significant amount of data and technology they have to do more to prevent fraud happening on their platforms,” Westmore says.

But ultimately, the state can do little without more resources and its 100 million pound investment to fight fraud isn’t enough, say experts. “The reality is that every year, the fraud figures have gone up and up and up,” says Harvey. “And each successive government has failed to properly fund it. I am not saying you can investigate your way out of this because you can’t. It is too big a thing now. What you need to do is spend more money in education. But the funding has not been there. It has been woeful.” (See “Government’s Fraud Strategy,” statement made by Suella Braverman, Home Office, UK Parliament, May 3, 2023.)

Fighting fragmentation

Aside from more funding, the U.K. needs greater coordination and data sharing among the government, the financial sector, tech companies and other private entities if it wants to truly come to grips with its fraud problem.

Rasha Kassem, Ph.D., CFE, a senior lecturer in accounting at Aston Business School in Birmingham, England, says a streamlined organization that encompasses all the different stakeholders involved in anti-fraud efforts would be the best solution to combat this fragmentation. The government bodies should work on having “just one organization and one system, and instead of five different budgets for five different organizations so that we have one budget. This does not mean that people would lose their jobs. It means that we will have bigger teams.”

Such logic also applies to data sharing. “You have several bodies trying to counter fraud, but they don’t share data, they don’t really collaborate adequately. Each one seems to be in their own world,” says Kassem.

Even the most basic information-sharing among state agencies needs to improve. Kassem says organizations such as the U.K.’s fraud-reporting system Action Fraud, which collects information from fraud victims, and the police do little to collaborate with each other on investigations. And it’s a similar story when it comes to sharing information between law enforcement and the financial sector. In the course of Kassem’s own research, police officers have told her that they struggle to collect information from the banks about frauds, criminals or suspects because some banks have rules requiring them to only release data to financial investigators.

“It’s complicated for them to collect evidence, so they depend on how friendly and cooperative the banks are just to release information,” says Kassem.

Even so, the private sector has made efforts to open channels of communication to prevent fraud and other scams. Stop Scams UK, which had its first full year of operation in 2021, was created to bring together telecom, banking and tech companies to find solutions in the sectors that are predominately targets of fraud in the digital age. Members include big banks such as Santander, NatWest and HSBC as well as tech giants Google and Meta.

Jonathan Frost is the former technical collaborations director of Stop Scams UK and previously helped set up the National Fraud and Cybercrime Reporting Centre at the City of London Police. He says the emergence of real-time payments (that are virtually irretrievable after they’re sent) have helped turbo-charge fraud in the U.K. Authorized push-payment frauds, where the fraudster convinces the victim to authorize a payment under false pretenses, are a particularly prevalent problem in the U.K. Push-payment frauds include investment frauds and romance scams, in which a fraudster might use social engineering over an extended period of time to get multiple payments from their mark. Victims in the U.K. lost 485.2 million pounds to this kind of fraud in 2022, most of it online, according to UK Finance. [See “Over £1.2 Billion Stolen Through Fraud in 2022, with Nearly 80 Per Cent of APP Fraud Cases Starting Online,” UK Finance; “Authorized Push Payment (APP) Scam. What are Push Payments?” ACI Worldwide; and “What the US Can Learn From the UK About Push Payments Fraud,” PYMNTS, June 22, 2023.]

The U.K.’s Payment Systems Regulator, which was created in 2013 under the Financial Services (Banking Reform) Act and became fully operational in 2015, unveiled plans earlier this year that allow victims of APP fraud to be reimbursed by the companies involved in the payment transaction, barring any gross negligence. (See “UK banks to reimburse fraud victims under new rules, regulator confirms,” by Jess Clark, The Guardian, June 7, 2023.)

“Under the new regime for reimbursement of authorized payment is that the bar for what they are terming gross negligence on the part of the customer is going to be set very high,” says Frost. “If the customer can come up with a reasonably decent tale of why they thought they were making legitimate payments, they are going to get their money back.”

Yet while this rightfully helps the victims, it does little to disincentivize the fraudsters who are often living abroad, says Frost. Indeed, the increasingly cross-border nature of these types of crimes — as technology allows us to interact with people across the globe — has complicated investigative efforts into fraud. Seventy percent of the fraud in the U.K. either starts overseas or has links from abroad, says the U.K. government. (See “Fraud Strategy: Stopping Scams and Protecting the Public,” Secretary of State for the Home Department, May 2023.)

“Banks and law enforcement really, really struggled to get that money back because by the time the victim has realized they’ve been a victim of fraud, that money may have gone to 20 different accounts and end up in a crypto exchange or overseas,” says Westmore.

Collaboration among organizations, government agencies and law enforcement is even more essential considering the international nature of fraud, especially regarding online fraud where the perpetrator is very often not in the same country as the victim. Without cooperation from international governments, it’s impossible to arrest a person or share evidence.

Law enforcement needs better investigation skills for internet-based crime originating overseas, says Frost. He compares the lack of solid procedures to investigate cybercrimes with the clear guidelines and procedures that police have for investigating murder. “It is kind of an irony that the only type of crime that our police investigate that has a manual is murder. And they studiously follow that when it comes to investigating murder. There is nothing for fraud at all. It is all fairly organic,” says Frost.

“We need to face up to the fact that the vast majority of fraud is internet-enabled and you won’t have much success if you fail to adapt your investigative strategy to recognize that simple fact.”

New anti-fraud legislation

Lawmakers in the U.K. are starting to update legislation to tackle fraud in this new environment. Anti-fraud experts say that big tech companies have a significant role to play combating fraud, especially since so much of it is conducted via their platforms. U.K.’s Online Safety Bill, which was introduced last year, is expected to be just the nudge tech companies need to take responsibility for fraud occurring on their platforms. (See “A guide to the Online Safety Bill,” GOV.UK, Dec. 16, 2022, updated August 30, 2023.) The bill is meant to protect consumers from fraud by placing the onus on tech companies to remove illegal content and give people more control over the content they engage with.

“There is a lot of debate, which is a discussion in itself, on how effective it will be, but the principle is obvious that if you have a system that promotes stuff, it should promote only good stuff, not criminal enterprises,” says Button.

The U.K. government is also proposing a new offense that’s part of the Economic Crime and Corporate Transparency Bill and is aimed squarely at large businesses. The Failure to Prevent Fraud Offence will make it easier to prosecute big businesses if their employees commit fraud, even if upper management is unaware of the wrongdoing. Up until now, prosecutors have had to prove what was called the “directing mind and will” of the company. That usually meant finding evidence the board of directors had knowledge of a fraud — a difficult burden of proof. (See “Factsheet: failure to prevent fraud offence,” GOV.UK, updated June 20, 2023; “Failure to Prevent Fraud for UK Corporates,” WilmerHale, April 12, 2023; and “We’re in for the biggest shake up in corporate criminal law this century,” by Barry Vitou, City A.M., Opinion, Sept. 8, 2023.)

“I think that will have a positive impact on organizations to take the prevention of fraud much more seriously if they are not doing so already, because if a member of staff does get involved in fraud, they will also be liable themselves in not having adequate procedures to prevent that,” says Button.

Experts see the bill as a significant shift in fraud prevention at the corporate level. “Introducing this new offense will give law enforcement authorities in the U.K. much more power to target corporates who have facilitated fraud on a grand scale for the benefit of the corporate,” says Westmore.

And while fraud risk management isn’t new to U.K. corporations, the new bill is likely to shift attitudes about prevention. “That could potentially be a really significant change to the way the companies have to look at how they manage their fraud risks,” adds Westmore.

Jennifer Liebman, CFE, is assistant editor at Fraud Magazine. Contact her at jliebman@ACFE.com.

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