PAC: UK being seen as “haven for fraudsters” where fraud is “everyone’s problem but no one’s priority"

 - Home Office “sluggish and outmanoeuvred” in operations with business sectors 

 - Police morale and public trust both undermined by system failures 

 - Much fraud has international element and overall fight is hampered by UK lack of capacity  

Fraud against businesses and individuals is a significant and growing problem that now accounts for 41% of all crimes committed in England and Wales. There were 3.8 million incidents of actual or attempted fraud in the year to June 2022, and nearly 7% of adults in England and Wales experiencing fraud or at least an attempt. While those numbers increase, charges and summonses are dropping. 

Combatting fraud is ultimately the responsibility of the Home Office, and in a report today the Public Accounts Committee is deeply disappointed in the slow progress made by government in the last five years. The Home Office’s most recent estimate of the cost of fraud to individuals is £4.7 billion a year but it can’t quantify the potential cost to businesses. 

Law enforcement is not set up to tackle the challenges presented by fraud. The volume and complexity of fraud overwhelms the capacity of both Action Fraud and local police forces, who lack the training and resources they need to pursue the hundreds of thousands of cases reported every year. Police morale is being undermined by the time it takes to investigate and prosecute fraud and then the relatively short sentences handed out when prosecutions are successful. 

The Home Office is dependent on the banking, technology, telecoms and retail sectors to fight fraud, but will continue to be sluggish and outmanoeuvred if it relies on purely voluntary charters with these sectors.  

The majority of frauds are also suspected to have an international element, but relationships with overseas criminal justice agencies are immature and threatened by the UK’s lack of domestic capacity. 

Dame Meg Hillier MP, Chair of the Public Accounts Committee, said: “Given the pervasive and damaging effects of fraud on business, individuals, and society it is extremely poor performance that Government still isn’t even able to fully grasp the extent let alone reduce the prevalence or harms.  There is just no sign that government has a grip on fraud or an adequate strategy to address it, while victims are left to pay the price.  

“Becoming a victim of fraud can cause lasting psychological damage. It can mean losing a lifetime’s savings, your whole retirement plan, or even your current business and livelihood. The system is so poorly resourced and co-ordinated compared to the problem it’s addressing that victims feel lost in the system and without hope of recourse. Opportunities to prevent further harm are being missed and public trust in law enforcement is undermined.” 

 PAC report conclusions and recommendations 

7.      We are disappointed by the slow progress government has made over the last five years in combatting the growing threat from fraud. Fraud can have a significant detrimental impact on people’s lives, causing serious psychological harm for victims as well as financial losses. In 2017, we called for urgent action to tackle this issue but things are getting worse. In the year to June 2022 there were 3.8 million incidents of actual or attempted fraud – an increase of 12% since the year to March 2017. Meanwhile, the number of charges and summonses for fraud have fallen. The Department does not yet have the data needed to properly understand the threat. Its most recent estimate of the cost of fraud to individuals is based on 2015-16 data, and it has no reliable estimate of the cost of fraud to businesses. Despite our recommendation five years ago that the Department should develop specific plans for how it will measure progress in tackling online fraud and regularly publish information on progress and performance, there is still no sign of a holistic fraud strategy with measurable targets. The Department announced plans for a new strategy in March 2022 but publication is now delayed until ‘early 2023’, with the Department unwilling to commit to a firm publication date. 

Recommendation 1: The Department should publish its fraud strategy without delay and specify what impact it will have on strengthening accountability and providing confidence that it is serious about reducing the harm caused by fraud. 

8.      Despite fraud being the most common crime in England and Wales, government’s communications with the public are still not effective. Fraud accounts for 41% of all crimes committed in England and Wales. Yet public recognition of the government’s fraud awareness campaigns is worryingly low. NCA identified 13 campaigns running at the time of our evidence session. Of these, most are recognised by less than 10% of the public. In 2017, we reported that a lack of co-ordination and consistency in education campaigns can confuse the public and reduce impact, and little progress has been made since then. Despite us raising concerns five years ago about the effectiveness of the flagship “Take Five” awareness campaign, the campaign is still not effective. Although the NCA has performed some evaluation, it is unable to measure the campaign’s overall impact. The NCA is analysing the experiences of victims of fraud to identify where it can best intervene to prevent fraud and it is working to develop an awareness campaign that resonates better than Take Five. 

Recommendation 2: The Department should set out, as part of its Treasury Minute response, how it will use the results of the National Crime Agency’s (NCA’s) research to improve the coherence and impact of its public awareness campaigns on fraud and how it will measure the impact of future campaigns. 

9.      Victims of fraud are being failed by Action Fraud, which risks undermining public trust in the police. We are seriously concerned that the failures of Action Fraud in supporting victims of fraud has earned it the nickname “Inaction Fraud”. Many victims feel lost in the system as there is often no response when they make a report to Action Fraud. More than 300,000 victims report their case directly to Action Fraud each year, and a further 600,000 reports come to Action fraud from businesses and industry. But less than 1% of cases received by Action Fraud result in a criminal justice outcome, where an offender is charged or prosecuted for the crime. We are worried that for many people, reporting a fraud may be their only contact with the police, and negative experiences of reporting fraud risks undermining public trust in the police more generally. The Department plans to improve the experience of victims and the level of support provided through a new Action Fraud system, and City of London Police claims it has put victims at the centre of designing the new system. However, this is not expected to be in place until 2024.  

Recommendation 3a: The Department should set out, as part of its Treasury Minute response, how Action Fraud’s replacement in 2024 will improve the way it engages with victims of fraud and updates them about their case and any plans it has to make improvements in the interim.  

10.  The Department has failed to support police forces to build the capacity or skills they need to tackle fraud effectively. Despite making up 41% of all crime in the year to June 2022, only around 1% of police personnel are dedicated to fraud. In April 2022, we reported on the Department’s Police Uplift Programme which aimed to recruit 20,000 new police officers. However, only 380 of these 20,000 officers (around 2%) will specialise in fraud. Although fraud is now mentioned in all Police and Crime Plans, police forces are still not prioritising fraud. Many front-line police officers do not know enough about fraud and have not been given the training they need. Forces find it difficult to recruit and retain civilians with the specialist skills needed to tackle fraud as they are also highly desirable to the private sector. Of around 27,000 cases per year sent to local police forces for investigation, less than 5% result in an offender being charged or prosecuted for the crime. 

Recommendation 4: The Department should outline, as part of its Treasury Minute response, how it will increase both the priority of tackling fraud within territorial police forces and the capacity of police forces to investigate cases. The Department also needs to step up its support to police forces to ensure they can tackle fraud more effectively. 

11.  The criminal justice system’s current approach to penalising and sentencing fraudsters is insufficient to prevent the UK being seen as a haven for fraudsters. Under the current system, law enforcement organisations can often spend longer investigating frauds than criminals receive as a sentence for their crime. This can have a negative impact on police morale. For crimes where the financial loss is less than £5,000, the maximum penalty is one year’s custody. Yet the majority of those found guilty receive a fine or community order. The Department acknowledges that the maximum sentence available for fraud, of up to 10 years imprisonment, is only used very rarely and needs to be used more. However, effective deterrence is not just about the length of a potential sentence, but also the likelihood of being caught. This is a major problem as less than 1% of around 900,000 frauds reported in England and Wales each year result in an offender being charged or prosecuted for the crime. The Justice Committee’s report Fraud and the Justice System, examined in depth how the criminal justice system is set up to tackle fraud.¹ It makes 16 recommendations aimed at strengthening the response to fraud, including that sentencing guidelines should be amended to give greater consideration to the emotional and psychological harms caused by fraud crimes alongside the financial losses incurred. At the time of our evidence session, the Department had not yet responded to the recommendations in the report, but this was subsequently published in January 2023. While Government recognised many of the issues raised by the Committee, its actions to address these are a work in progress. 

Recommendation 5: The Department should work with partners in government to address the recommendations of the Justice Committee’s report Fraud and the Justice System. 

12.  The Department’s reliance on voluntary charters does not produce a strong enough incentive for industry to rapidly improve its response to fraud. Industry sectors, such as banking, technology and telecoms, have a vital role to play in designing out opportunities for committing fraud. However, not enough has changed since we last looked at this five years ago. The Department is still reliant on voluntary action from industry, leading to inconsistencies for victims. For example, only around 50% of victims of authorised push payment fraud, where the victim is pressurised to authorise a payment, get their money back. The Department admits that inconsistency arises because reimbursement is on a voluntary basis and is looking at introducing mandatory reimbursement. It is possible to secure impacts through voluntary charters. For example, the Department asserts that persuading telecoms companies to block scam texts sources led to more than a 90% reduction on some operators. However, we are concerned that progress by these means is often difficult and slow, exposing people to the threat of fraud in the meantime. 

Recommendation 6: The Department should set out, as part of its Treasury Minute response, how voluntary charters will contribute to its fraud strategy, including what changes it expects to see as a result of the charters, by when these will be achieved and what action it will take if they are not. 

13.  The Department has not prioritised developing relationships with international criminal justice agencies. Government estimates that around 70% of fraud cases have an international element, meaning that strong relationships with foreign and multinational criminal justice agencies are crucial to tackling fraud. The international dimension of fraud cases often causes long delays to investigation in securing the necessary evidence. The NCA is looking to improve multilateral co-operation to prevent and disrupt fraud. It reports that it has built good relationships with some countries, for example it has been working with counterparts in countries such as Ghana, Nigeria, and India, but it accepts there is still much more to be done. However, despite this, the City of London Police is currently scaling back its international capacity building work as it has insufficient resources to do this alongside upskilling police officers in the UK. 

Recommendation 7: The Department should set out, as part of its Treasury Minute response, how it will achieve a step change in the breadth and strength of its international relationships as part of its efforts to tackle fraud.