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26 April 2023

How the UK gave up on policing fraud

Fraud is now endemic, accounting for 40 per cent of crime, but only a tiny minority of cases are ever investigated.

By Emma Haslett

It was 8.30 one morning last October when Natalia Ribbe realised she’d been cheated out of £50,000. The day before, she had been contacted by a man purporting to be a representative of her bank, who had pointed out some questionable transactions in her account, and encouraged her to transfer money to a new one. For five hours she was passed from “department” to “department”, who talked to her in soothing tones: “They said, ‘Don’t worry, everything is going to be OK. Your bank is FCA-approved and you’re going to get your money back.’ ”

At the end of the call the person she was speaking to arranged a follow-up. The following morning the agreed time for the call came and went. Ribbe became suspicious and contacted her bank. “There was nothing in [the account],” she says. Within 20 minutes it was confirmed: “They replied saying, ‘I’m really sorry, you’re the victim of fraud.’ ”

Ribbe’s Italian restaurant, Barletta, had opened in Margate in 2019 and was receiving rave reviews. It employed 17 staff, and Ribbe was in the process of setting up a second business, a wine bar, in the town. Now she had lost her livelihood. She was forced to let her staff go; Barletta closed in December. The police passed Ribbe over to Action Fraud, the national reporting centre, where she filled in a form. She heard nothing – at no point was she contacted by anyone in law enforcement – until a generic email arrived in February. “It just said that there wasn’t enough evidence to build a case and that they were dismissing it,” she says.

Ribbe’s story is shocking, but not unique. Every year, thousands of people are victim to fraud. Social media messages cheat people into sharing their bank details; honey-toned cold callers encourage people to move life savings or pensions into “safe” accounts; criminals use fronts to launder money; accountants fiddle the books. The Justice Select Committee has found that fraud now accounts for 40 per cent of all cases of crime, while another estimate suggests we lose £190bn a year to it. But it’s hard to pin down the precise cost because the National crime Agency (NCA) believes just 20 per cent of incidents are reported.

[See also: “Fraud adapts”: How to fix the UK’s online crime problem]

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What we do know is that fraud, particularly threats perceived as “low-level”, like email and social media scams, exploded during the pandemic, with figures from the Office for National Statistics (ONS) showing such offences increased by 25 per cent during the two years to the end of March 2022.

Bafflingly, this rise has coincided with a steep decline in enforcement: the Ministry of Justice says the number of fraud convictions in the year to the end of last March was down 45 per cent on the year before the pandemic. That isn’t necessarily because of the pandemic – during an appearance on the Double Jeopardy law podcast, the economic crime barrister Clare Montgomery KC pointed out that “there’s overall been a reasonably steady and constant decline in the level of interest in prosecuting fraud from about 1990 onwards… I don’t believe [police] have any interest in prosecuting fraud anywhere”. In January last year Theodore Agnew, a Treasury minister, became so frustrated with the situation that he resigned during a speech in the House of Lords, saying “the Treasury… appears to have no knowledge of, or little interest in, the consequences of fraud to our economy or society”.

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The situation is bewildering. Why does the UK care less than ever about enforcing the most common crime?

According to the UK’s small yet vocal economic crime enforcement community, the “golden era” of fraud policing was in the late 1980s and early 1990s. In 1990, three years after its creation, the Serious Fraud Office (SFO) had a major victory with the conviction of the so-called Guinness Four – the businessmen Ernest Saunders, Gerald Ronson, Jack Lyons and Anthony Parnes – who were found guilty of artificially inflating the price of Guinness shares. After appeal, the four were sentenced to up to two and a half years in jail for charges including false accounting, conspiracy and theft, and fined a total of £9m. It was a promising start for an organisation that owed its creation to high levels of public dissatisfaction at the UK’s approach to enforcing economic crime.

But the SFO’s triumph was short-lived. A second trial related to the Guinness case was abandoned, while the Blue Arrow trial, in which bankers executing the buyout of a recruitment firm were accused of misdeeds, collapsed after four convictions were overturned, costing taxpayers £40m – the UK’s most expensive criminal trial at the time. Then, in 1996, Kevin and Ian Maxwell – the sons of Robert – were acquitted of charges brought by the SFO after it emerged, following the death of their father, that more than £400m was missing from the company’s pension fund. That trial had lasted eight months and cost £25m. Less than ten years after it had been established, politicians began to call for the SFO to be wound up.

[See also: Why the trope of benefit fraud has returned]

Almost three decades later, the agency finds its reputation largely unchanged. “When people are talking about the SFO, there’s always a sigh,” says Anita Clifford, a barrister at Red Lion Chambers who focuses on economic crime. The SFO’s current leader, Lisa Osofsky, announced in November that she was planning to step down after five years. Under her leadership the organisation had its fair share of high-profile victories – including, in November, a conviction against the mining giant Glencore for bribery and corruption which led to a penalty of £276m, the UK’s biggest financial penalty from a corporate conviction. But the SFO has also suffered a number of blows, including dropped cases against Rolls-Royce, GSK and most recently a bribery case against the oil and gas giant Unaoil.

Such high-profile (and costly) defeats make it harder for those policing fraud to take risks, says Michael Levi, a professor of criminology at Cardiff University. Other agencies are increasingly being put off; one, says Levi, “blew much of its entire annual budget” on pursuing a case, only for it to fail. “That makes you risk averse.”

Still, if those big SFO trials were a good reference for what economic crime is – theft, bribery and corruption by dastardly City boys with slicked-back hair and clipped movie villain vowels – most of us would be fine. But we aren’t. Computer misuse rose 89 per cent between the year ending March 2020 and March 2022, according to the ONS, and much of that is targeting ordinary people and their businesses. As Ribbe discovered, the post-pandemic explosion in fraud isn’t just catching out the old and the desperate – the young and tech-savvy are increasingly victims too. Over half of scams are now targeted at 16-34-year-olds, the Local Government Association says.

Enforcement for these smaller cases of economic crime is left to an alphabet soup of government agencies. In cases of corporate fraud, it’s the FCA – the Financial Conduct Authority. HMRC (His Majesty’s Revenue and Customs) will come for you if you’re committing tax fraud, and if it’s something a bit sexier, it’ll be the NCA. It could be the CPS (Crown Prosecution Service), or the City of London Police. Clifford is in the process of prosecuting three cases on behalf of the Inland Revenue in which business owners are accused of abusing the government’s Covid Bounce Back Loan scheme.

Because the UK’s approach to economic crime is so piecemeal, smaller cases often fall between these agencies. And “small” is a relative concept: one of Clifford’s clients has been cheated out of £2.5m. “But from the SFO’s perspective… it’s too small for them to look at. If you took it to City of London Police they could look at it, but they probably have so many other companies in the Square Mile that have been defrauded, so they’re not necessarily going to. The [case] will just sit in the Action Fraud repository for however many months until they inevitably get a response saying, sorry, we’re not going to investigate it.”

At that point, as Ribbe has discovered, banks may provide refunds to victims. Some do, some don’t – but that’s beside the point. “What is not investigated cannot be prosecuted, and what is not prosecuted cannot be convicted,” says Levi.

The government appears less interested than ever in helping. Ian Dyson is a former commissioner of the City of London Police who retired last year. He joined the force in 2010, “within weeks of George Osborne announcing his first comprehensive spending review”. After that there was little certainty over budgets. “We were not sure [how much] money there would be next year.” There isn’t much information out there about how much the UK spends on preventing fraud, but in 2019 the government boasted it was investing £48m in “additional funding” to tackle economic crime; £48m, for crime that costs the UK £190bn a year.

To be fair to the government, there are moments of enthusiasm. Last year’s focus on driving Russian oligarchs and their corruption out of the City of London, for instance, spawned three economic crime bills, while the outcry over Covid loan abuse led to the creation of a specialist fraud unit – another acronym-to-be, the Public Sector Fraud Authority (budget, £25m; estimated cost of Covid loan losses, £4.9bn), which is nestled inside the Cabinet Office and the Treasury.

In a way, that’s part of the problem, says Dyson. In circumstances where press attention moves to economic crime, “there’ll be lots of good words from the politicians, but there won’t be the money to do what is needed to be done”. The enforcement that does take place “is done on a shoestring”, he says. “Over the whole time that I was involved in it, there was this frustrating political assumption that you can do more with the same or more with less. The real solution is to acknowledge that the public purse does not have the funds, and for government to look innovatively at using things like FCA fines and asset confiscation to fund what is needed.

“If I think back to 20 years ago, the Home Office used to have a research group doing papers on what works. That sort of thinking just doesn’t happen now. It’s all about how do we just keep the political level happy.”

For the victims of fraud, it is clear that this style of reactive policing doesn’t work. At its highest level, economic crime poses a threat to the stability of the UK’s finance sector. “It’s a complete disconnect to be one of the world’s major financial centres and then to just not have a grip on fraud, which happens on our financial markets and through our banks,” says Clifford. Lower down the financial food chain, it ruins lives. The Barletta fraud “affected my whole life”, says Ribbe; she adds that she has suffered depression a result.

The UK’s lack of interest in policing fraud fails to acknowledge the trauma being a victim of it can cause. “Economic crime is more than just ‘find my money’,” says Dyson. “It is a threat to the UK.” The authorities’ failure to investigate it not only means there is no hope of Ribbe recovering her livelihood – it goes to the very core of our sense of fairness: it denies her the chance of justice.

[See also: Was 2022 the year we reached peak scam?]

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