Credit, Collections & Insolvency News
In January 2022 the Fraud Act 2006 and Digital Fraud Committee was established with a remit to recommend courses of action that could tackle a crime that now accounts for over 40% of all crimes committed in the UK. Under the leadership of Baroness, Lady Morgan of Cotes the committee recently published its report which has 92 specific recommendations.
Despite its length (190 pages) the report is not turgid and doesn’t pull its punches. It is wide-ranging and covers many forms of fraud and many of the new, digital mechanisms employed by fraudsters including Authorised Push Payment frauds and the use of cryptocurrencies as a means of escaping with the funds. With contributions from the police, lawyers and UK Finance, among others, it is probably one of the hardest-hitting documents yet to come from within government on the scale, challenges and inadequate responses to this crime. As the report says “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.”
No sector escapes unscathed from the authors’ criticisms and the lack of coordination across government departments when it comes to accountability for fraud is particularly highlighted. Other players singled out for their failures to close down the fraudsters’ attack vectors are telecoms and social media. The report even calls for a new corporate crime of “failure to prevent fraud” to be included in legislation with severe financial penalties for those convicted. It also recommends changes to banks’ AML and KYC processes to make it more difficult for fraudsters to open accounts in the first place. The committee has called for a thematic review by the FCA on retail banks in this area and for stress tests to be developed that make sure emerging threats to KYC procedures are shut down quickly.
This is a welcome intervention by the House of Lords in an area that has been allowed to grow unhindered in recent years and now costs the UK economy an estimated £4bn annually. The government is to respond within two months and it is to be hoped that they take the recommendations seriously and act quickly on them. Many of the committee’s recommendations are not expensive or difficult to implement yet could have a powerful impact on this heinous crime which too often goes unpunished.
In the UK, digital fraud is committed at scale and with relative impunity. Our digitised society has transformed fraud from being the preserve of opportunist individuals to the illegal revenue streams of Organised Crime Groups and global malign actors. These organised criminals use the profits from fraud to fund further organised crime, including human trafficking and the drugs trade… Criminals turn to fraud because it can be conducted cheaply, at pace and without fear of likely or successful prosecution.
