Law enforcement agencies are chronically underfunded for the fight against fraud in the UK, a new report says.
It also says an ‘alphabet soup’ of responsible bodies is ineffective at stemming the billions of pounds a year lost to consumers through scams.
The criminal justice system has failed to keep pace with the threat, making the UK a “lucrative market” for organised criminals around the world to commit fraud, it adds.
If citizens were being routinely mugged and having millions of pounds stolen from their wallets in broad daylight, every organisation involved in allowing this to happen would have no choice but to deal with it swiftly, and the perpetrators would be brought to justice in court.”
The report – Fighting Fraud: Breaking the Chain – is the culmination of work by peers.
A House of Lords committee received in excess of 90 individual submissions and took oral evidence from more than 45 witnesses ranging from academics to victims and law enforcement representatives.
Evidence was gathered from across the UK, although many of the report’s recommendations – such as a new corporate criminal offence of “failure to prevent fraud” – apply only to England and Wales. Justice is devolved in Scotland and Northern Ireland.
Highlighting the scale of the problem and its huge impact on the economy, the report says: “Successive governments have failed to tackle fraud with the priority it deserves.
“If citizens were being routinely mugged and having millions of pounds stolen
from their wallets in broad daylight, every organisation involved in allowing this
to happen would have no choice but to deal with it swiftly, and the perpetrators
would be brought to justice in court.
“Because most fraud is now happening online and often involves social engineering of the victim, the exponential growth in fraud and scams has been invisible and fraudsters face little risk of being caught. This has to stop.”
Pandemic has contributed to ‘fertile ground for fraudsters’
The Covid-19 pandemic accelerated the shift towards digitalisation, with more
people turning to online technologies to conduct their daily activities, the report says.
It adds: “Online banking and shopping have become mainstream, online dating has become widely adopted, and online messaging platforms and social media are used to
communicate with friends, family and businesses.
“It is through these channels that the tendrils of domestic or overseas organised rcime groups are being extended to reach victims in the UK.
“The UK’s widespread use of the English language, its position as a digitalised, global financial hub, the enthusiastic adoption of the Faster Payments System and the emergence of cryptoassets make for a fertile ground for fraudsters.”
‘Permissive culture’
Law enforcement agencies are “chronically underfunded for the fight”, the report says, adding: “Only a paltry 1% of law enforcement is focused on tackling economic crime.
“The effect of such under-prioritisation has been to create a permissive culture across government and law enforcement agencies towards fraud and the criminals who perpetrate it.”
Highlighting a “significant” decrease in the prosecution of fraudsters south of the border over the past decade, the report says much of the UK’s criminal justice system has failed to keep pace with the threat.
It adds: “Without fear of facing investigation or justice, organised criminals around the
world turn to the UK as a lucrative market to commit fraud.
“They know they can operate with limited fear of prosecution or redress for their crimes, the proceeds of which they use to fund further criminal activity including human trafficking and the drugs trade.”
The report continues: “Fraud is far from a victimless crime. The financial impact can be significant, particularly in the context of the current cost-of-living crisis, which ruthless
fraudsters are exploiting to manipulate vulnerable consumers.
“Victims of fraud are socially engineered by malicious fraudsters, many will face a crisis of confidence and lose trust in the authorities and people that surround them, and some may suffer devastating mental health consequences.
“Some will never recover the funds they have lost, and those that do may remain emotionally shattered by their experience. Many will never see the perpetrator face justice.”
Telecoms sector ‘must do more’ to protect consumers
Meanwhile, the telecoms sector has “no real incentive to prevent fraud”, the report says, adding: “It must do more to tackle phishing emails and smishing texts before they reach victims, and must prevent fraudsters from making spoof phone calls using easily accessible technology to manipulate vulnerable victims into thinking they are a trusted organisation.
“Similarly, webhosting providers must prevent fraudsters from registering fraudulent website domains.
“The tech sector must slam the brakes on fraudsters using online advertising and social media platforms to reel in consumers, and do more to verify the identity of those using online dating platforms before they commit romance fraud.”
Conversation