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Thursday
Jun302016

Martin Kenney: UK fraud is up, police budgets are down. Criminals cheer

Fraud is costing the UK a staggering £193 billion ($282 billion) a year, according to a new report.

The 2016 UK Annual Fraud Indicator calculations make for grim reading: £6,000 ($8,769) lost every second of every day, equating to more than £3,900 ($5,700) per adult.

Business fraud accounted for £144 billion ($209 billion), the study by the University of Portsmouth’s Centre for Counter Fraud Studies said, while fraud against individuals was estimated at £9.7 billion ($14 billion).

A prior estimate made in 2013 by the now defunct National Fraud Authority put the cost of fraud at £52 billion ($75 billion) a year, so the figures represent a huge jump. And if you consider this in the context of the UK’s ailing National Health Service, supporting education or even a potential cut in taxes, the losses are simply appalling.

The biggest impact has been in the private sector, where procurement fraud has cost businesses £127 billion ($183.5 billion). How many jobs, taxes or cut in pay does this represent? It’s only when these figures are given a human perspective that they make sense.

So what is the UK government’s response? Austerity cuts to UK policing have seen the vast majority of fraud squads decimated. The cuts to policing have seen highly skilled fraud detectives absorbed back into mainstream CID (Criminal Investigation Department) policing. Even uniform policing in fraud is not considered a policing priority.

The shortsightedness of this realignment of policing assets is disturbing. How can a problem as big as this not generate a meaningful response from UK politicians or government? Effectively the problem is being ignored. Fraud is real money. It isn’t potential money, realizable only when drug barons sell their illicit goods.

Criminals are dynamic when dealing with the risk of capture. In the 1960s and 1970s, armed robbery was the scourge of London, with sawn-off shotguns and stocking masks being the tools of choice. The Metropolitan Police response was the famous and much lauded “Flying Squad” (aka “The Sweeney”).

The criminals’ response, once they realized the police were meeting fire with fire … was to move into drug trafficking. In the 1980s, 1990s and into the 2000s, the police once again responded in kind, with specialist undercover squads and surveillance operatives accounting for many drug dealer arrests. So what's next? The natural evolution has been the progression into fraud.

Why would you run the risk of dealing in drugs and receiving a huge prison sentence, when you can defraud someone and know that there’s hardly any specialist officers left to investigate your crime -- and even if you do get caught, then the prison sentence will be light?

The UK has implemented a fraud-reporting system called Action Fraud. The idea behind this is that everybody affected reports their crime to Action Fraud, and the National Fraud Intelligence Bureau (NFIB) wades through the reports and identifies commonalities, before sending intelligence and evidence packages to the relevant police force. Sounds great, doesn’t it?

One of the investigators in my firm served with fraud squads in the northwest of England for 17 years. He played a sizeable part in implementing Action Fraud in that region. As he said to me recently, what’s the point of the NFIB issuing intelligence and fraud packages, in the full knowledge that there are no specialist officers to investigate them? Its called paying lip service.

The problem is huge and there is apparently no appetite in UK law enforcement (due in part to austerity cuts), to face up to the task.

Criminals are not daft. Fraudsters in particular are by nature crafty and intelligent. They will continue to prey on victims until such time as there is a realistic possibility of their being apprehended and sentenced to a term of imprisonment that reflects the severity of the crime.

Experts in our field of asset recovery get tired of telling anyone who will listen that fraud is not a victimless crime. The UK government should fund the specialists capable of protecting the casualties of this ongoing economic war that continues to blight the UK.

____

Martin Kenney is Managing Partner of Martin Kenney & Co., Solicitors, a specialist investigative and asset recovery practice focused on multi-jurisdictional fraud and grand corruption cases www.martinkenney.com |@MKSolicitors.

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