Here’s to the success of the UK’s Fraud Review

   

Last night we entertained Steve Wilmott, Head of the Economic Crime Unit for the City of London Police, at the Financial Services Club.  He was presenting the implementation of the results of the UK's Fraud Review,
which combined the efforts of the Serious Fraud Office,  the Police and
Government departments, after being kicked off by the Attorney General,
Lord Goldsmith, in late 2005.  The results are that there is a new
regime for detecting, investigating and prosecuting fraudulent
activity.  The report, for example, recommends:

a) that fraud should be measured on a consistent basis across the economy;

b)
that the government should establish a National Fraud Strategic
Authority to devise a national strategy for dealing with fraud and
ensure that it is implemented;

c) the establishment of a National Fraud Reporting Centre for businesses and individuals to report fraud;

d)
that the Home Secretary should consider making combating fraud a
policing priority with law enforcement agencies encouraged to develop
plans which
include local performance targets for fraud; and

e)
the maximum sentence for fraud should be increased to 14 years with
extended sentencing options available to the court, as well as cases
being handled by a specialised Financial Court jurisdiction with more
alternatives to full scale criminal trials made available.

You can read the full 377 page report along with other updates if you want but that's it in a nutshell.

The
intriguing aspect here are some of the things Steve mentioned.  For
example, on point (c), creating a National Fraud Reporting Centre,
Steve pointed out how difficult it is for the average person to walk
into their local police station and report:

"I invested
£200,000 in a South African Diamond operation, which came through a
Spanish Agent, representing an American company, with a Netherlands
Antilles bank account.  The money appears to be lost, could you help to
get it back?"

when the person in front of you is reporting a
lost cat and the person behind you is trying to tell them that they
just got spat at by a yob on the street.

Equally, if you were
found with £200,000 of cocaine you would be liable for up to ten years
in jail, whereas if you duped Joe Public into giving you £200,000 ...
you'd be surprised if you got more than a ticking off, "You very naughty fraudster you".

This is the reason for change.

Steve
talked about the Nigerian 419 scams and lottery emails, and said that
1% of people still respond to these mass mailings.  You may think these
people are idiots, but often they're not.  For example, he's had people
who were CEO's of major firms caught out in scams. 

The reasons
these folks get caught out is that the fraudsters are very
professional.  They send out glossy brochures about the South African
diamond mines and then call you up and ask if you've read the
brochure.  These scamsters are often set up in a boiler room style
operation, where 10-12 chaps make hundreds of calls a day.  When they
get a hold of you, all you hear is a very professional dealing room ...
which is the tape that's playing in the background of the boiler room
to make it sound like a financial trading room.

The City of
London Police broke up one of these boiler room style operations just
last week in Germany.  There were several young guys in their early
20's in the room calling across the UK all day.  The guys were all
Brits, as people don't trust strangers with foreign accents (unless it's your banks offshore call centre of course).

Another aspect of the fraud trends is that ten years ago, 10% of fraud cases involved a bank insider.  Today, it's 40%.

No
wonder the figures are major with anything from £14 billion to £20
billion a year being reported as lost in fraud.  Compare this to the
£26.5 million a year funding for the Serious Fraud Office, and you can
see why fraud is a difficult nut to crack.

Having said that,
Steve's Economic Crime Unit has had it's budget increased to £25
million over the next three years, and he now has 150 officers
increasing to 200 by the end of the decade to investigate fraud.

My
walk away is that the UK has treated fraud as a petty white-collar
crime for too long.  Most banks and businesses do not report fraud
because of the embarrassment if it were made public.  Even if they do
report it, it's not easy to get a case built that goes to trial and
conviction.

The result is that if you really want to make money
illicitly then rip-off people's money through intelligent siphoning of
their bank accounts, rather than robbing banks or drug-running. You're
far more likely to get away with it and far less likely to be jailed if
you're caught.

I hope the Fraud Review changes this position.