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UK Fraud Threat – read the 2021 reports

01/02/2021

Two recently published reports have argued that the UK faces growing problems with the scale of fraud, and its capabilities to tackle the challenge.

Royal United Services Institute (RUSI),
  1. According to 'The Silent Threat: The Impact of Fraud on UK National Security', a new report from the London-based think tank, the Royal United Services Institute (RUSI), fraud has now "reached epidemic levels in the UK", with fraudsters even offering "crime subscription services," for some types of fraud.
  2. Analysing figures from the 2019-20 Crime Survey, the report identifies 3.7 million incidents of fraud in England and Wales alone, most typically
    • Credit card fraud,
    • Identity theft, or
    • Cyber-related criminality,
  3. Making fraud the crime UK citizens are most likely to experience.
  4. The report also assesses that fraud is generating escalating costs to business, estimated to be around £140 billion per year, and to the public sector, estimated to fall somewhere between £31-48 billion per year, around the value of the UK's national defence budget.
  5. According to RUSI, the UK fraud epidemic is now a national security issue, not only because of its scale, but because of the sources from which it emanates.
  6. The report notes that the UK has become a primary fraud target for international Organised Crime Groups (OCGs) and terrorist networks, citing one case where
    1. Islamic State activists defrauded UK pensioners out of £1 million to support funding for travel from the UK to Syria and Iraq.
    2. The fraudsters impersonated police officers and gained access to account funds by telling their targets that their accounts had already been compromised.
  7. RUSI also believes that at its current levels, fraud has
    1. "the potential to disrupt society…by psychologically impacting individuals, undermining the viability of businesses…[and]…putting pressure on public services."
    2. It further undermines the UK's reputation as a secure place to do business, which is a particular concern as the country seeks to build wider global economic relationships after its departure from the European Union (EU).
KPMG
  1. A separate report, the UK 2020 'Fraud Barometer' from professional services provider KPMG, has also recently been published.
  2. At first glance, it provides a slightly contradictory picture to RUSI, noting that by value, fraud cases that passed through UK courts in 2020 were down 36% by value on the previous year, at £724 million, and that the volume of fraud cases had decreased by 51%.
  3. However, as the Barometer notes, their figures do not reflect broader levels of societal fraud "but rather fallout following the COVID-19 lockdown restrictions on the courts."
  4. Indeed, the paper also notes that certain types of fraud cases had risen by value during the pandemic, including
    • A 200% increase in procurement and
    • 675% increase in loan and mortgage fraud.
Commentary
  1. Both reports, therefore, acknowledge the need for renewed action to tackle the fraud challenge in the UK.
  2. For RUSI, part of the answer lies in
    • The development of a national fraud strategy and its integration into the country's national security structures.
    • The police and National Crime Agency (NCA) should enjoy better resources, and the UK intelligence agencies should play a greater role, with intelligence directly from the National Security Council (NSC).
  3. The authors of the report note that this is one way in which to address the
    • "Responsibility vacuum" around fraud, where the crime is "everyone’s problem but no-one’s priority.”
  4. Nonetheless, RUSI also argues strongly that an effective response to fraud will need the full and close cooperation of the private sector, enhancing the role of Public-Private Partnerships (PPPs) and the opportunities they bring for intelligence and knowledge sharing between the sectors.
  5. The private sector will also need to increasingly focus on ensuring that their financial crime controls and platforms are agile and flexible enough to handle the threat's scale and fluid character.
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