What is fraud?

Fraud is the act of gaining a dishonest advantage, often financial, over another person. The Fraud Act 2006 provides for a general criminal offence of fraud in England and Wales and Northern Ireland. This can be committed in three ways:

  • by false representation;
  • by failing to disclose information; and
  • by abuse of power.

Types of fraud

The Office for National Statistics (ONS) has said that most incidents of fraud fall under ‘fraud by false representation’. This is where a person makes a representation that they know to be untrue or misleading. The crime covers a wide range of fraudulent activity, with the most common types known to include:

  • Banking and payment card frauds: these involve falsely obtaining or using personal bank or payment card details to carry out fraudulent transactions. This can include using a false identity, a deceitful credit application, credit or debit cards, cloned cards, cheque books or online accounts.
  • Consumer and retail frauds: these occur when goods or services were paid for but failed to materialise, were misrepresented at point of sale, or were faulty or stolen. This includes bogus callers, ticketing fraud, phone scams and computer software service fraud.
  • Advance fee payment frauds: when a payment is made to fraudsters who claim to be in a position of authority, to transfer money or for a promise of employment, wealth or gifts (including lottery scams and inheritance fraud).

Action Fraud, the UK’s national reporting centre for fraud and cybercrime, has published an A-to-Z list detailing different types of fraud. The list outlines 11 overarching categories and supplies information on how certain fraudulent activities work.

Scale of the problem

The Crown Prosecution Service (CPS) has said that fraud is now the most commonly experienced crime in England and Wales. Using data from the Crime Survey for England and Wales (CSEW), the ONS has reported that there were 5 million fraud offences in the year ending June 2021. This represented a 32% increase compared with the previous year, including large rises in ‘consumer and retail fraud’, ‘advanced fee fraud’ and ‘other fraud’. In contrast, the ONS highlighted that crime types such as theft and robbery saw falls during periods of lockdown.

The ONS said that the data may show “fraudsters taking advantage of behaviour changes related to the coronavirus (Covid-19) pandemic”, such as increased online shopping and increased savings. For example, ‘advance fee fraud offences’ included common scams where victims transferred funds for postal deliveries. Other fraud included investment opportunity scams. However, the ONS reported that only a minority of these offences (26%) resulted in the loss of money or property with no or only partial reimbursement.

The National Fraud Intelligence Bureau (NFIB) collects fraud offences reported to the police, Action Fraud and the industry bodies Cifas and UK Finance. It reported a 36% rise in fraud offences in the year ending June 2021 (to 424,397 offences) compared with the previous year. This included a 34% increase in ‘online shopping and auctions fraud’ (from 70,761 to 94,795) and a 51% increase in ‘financial investment fraud’ (from 14,685 to 22,200 offences).

NFIB data also showed that referrals from Cifas (who report instances of fraud where their member organisations have been victims) decreased by 1% (to 312,895 offences) compared with the year ending June 2020. However, UK Finance reported a 43% increase to 153,515 offences. The ONS noted that many cases recorded separately by UK Finance are not reported to the NFIB as they “hold insufficient information to be of value from an intelligence perspective”.

In addition, a 2019 report by the audit, tax, advisory and risk firm Crowe and the Centre for Counter Fraud Studies at the University of Portsmouth, entitled ‘The Financial Cost of Fraud 2019’, found that fraud losses equated to at least £130 billion a year for the UK.

What is the impact of fraud on vulnerable people?

Some people are more at risk of becoming a victim of financial fraud, for example individuals with a mental health problem or dementia.

In its report ‘Caught in the Web: Online Scams and Mental Health’, the Money and Mental Health Policy Institute said that people experiencing mental health problems are particularly vulnerable to online scams. It reported that national polling had found that people who have experienced mental health problems are three times more likely than the rest of the population (23% versus 8%) to have been a victim of an online scam.

The report explained that common symptoms of mental health problems can put people more at risk of becoming a victim. For example, impaired decision-making, increased impulsivity and low motivation can all make it difficult to spot scams and avoid losing money or personal information. In addition, those with mental health problems are more likely to be isolated or experiencing financial difficulties, meaning they are more likely to become a victim of an online scam.

The report also found that falling victim to an online scam can have a negative impact on mental health and finances. It argued that as those with mental health problems are more likely to be living on lower incomes or in problem debt, even smaller financial losses can be damaging. Becoming a victim can also be a traumatic experience, with 40% of online scam victims reporting having felt stressed and 28% having felt depressed as a result.

The Alzheimer’s Society has said that having dementia puts “people at greater risk of financial abuse for many reasons”. It explained that those with dementia might be less able to judge risk and that living alone might make them more vulnerable. In addition, it said that the fact that someone has dementia can make it difficult to tell when financial abuse is happening.

Age UK has highlighted the impact of fraud on older people in England and Wales. Based on an analysis of CSEW data between 2017 and 2019, it has alleged that an older person becomes a victim of fraud every 40 seconds. Age UK has argued that while fraud affects people of all ages and backgrounds, “those older people with higher incomes, or who lived alone, were more likely to report having been a victim of fraud”. However, in 2020 the ONS said that adults aged 65 and over were less likely to be a victim of fraud than those in younger age groups. It noted that while this “may appear contrary to other reports on victims of fraud, where it is often reported that older people are more vulnerable to becoming victims […] the types of fraud where evidence suggests that older people are more likely to be victims, such as lottery scams and investment frauds, represent only a small proportion of [crime survey] fraud”.

Age UK has also focused on the impact of becoming a victim of fraud. It has said that alongside financial losses, becoming a victim can also “seriously affect a person’s quality of life and wellbeing”, with many people experiencing “a deep sense of shame, embarrassment, anxiety and loss of independence following a scam”.

What is the Government doing to tackle fraud?

Various bodies are responsible for helping to reduce fraud, including the police, central government and industry organisations. Some recent actions taken to tackle fraud by both the Government and the Payment Systems Regulator (PSR)—a subsidiary of the Financial Conduct Authority—are set out below.

Draft Online Safety Bill

In May 2021, the Government published the draft Online Safety Bill. Unlike previous plans for a regulatory framework for online safety, which did not include financial harms and had been subject to criticism as a result, the draft bill included user-generated fraud. In a written statement to mark the draft bill’s publication, Oliver Dowden, then Secretary of State for Digital, Culture, Media and Sport, explained that the scope of the bill had been widened to include financial harms caused by online fraud:

Since the publication of the full government response in December 2020, there has been significant concern about the exclusion of online fraud from the legislation. This Government understand the devastating effect that online fraud can have on its victims, so today we are announcing that the Online Safety Bill brings user-generated fraud into the scope of the regulatory framework.

This change will aim to reduce some specific types of damaging fraudulent activity. In tandem, the Home Office will be working with other departments, law enforcement and the private sector to develop the Fraud Action Plan, including the potential for further legislation if necessary.

A joint committee of both Houses is currently undertaking pre-legislative scrutiny of the draft bill.

Joint Fraud Taskforce

In October 2021, Home Secretary Priti Patel announced the relaunch of the ‘Joint Fraud Taskforce’. This is a “partnership between the private sector, government and law enforcement to tackle fraud collectively and to focus on issues that have been considered too difficult for a single organisation to manage alone”. To coincide with the first meeting of the taskforce, the Home Office highlighted the publication of three new fraud charters—ranging across the retail banking, telecommunications and accountancy sectors—aimed at reducing the “growing threat” of fraud.

Reimbursing victims

In 2018, the PSR set up a steering group of industry and consumer representation to develop a voluntary code to assist victims of Authorised Push Payment (APP) fraud. APP fraud is when a person or business is tricked into sending money to a fraudster posing as a genuine payee.

In May 2019, the group published a new voluntary ‘Contingent Reimbursement Model Code for Authorised Push Payment Scams’. It said that the code aimed to reduce both the occurrence and impact of APP scams, and was “designed to give people the confidence that, if they fall victim to an APP scam and have acted appropriately, they will be reimbursed”. It also explained that the code set out standards for signatory Payment Service Providers (PSPs) and for customers who are covered by the code. The Government welcomed the announcement, stating that it “marks a significant step forward in the fight against APP frauds”.

However, press reports have highlighted that not all banks have signed up to the code; the code has been inconsistently applied by different banks; and the average reimbursement rate remains at less than 50% since its introduction. A Lending Standards Board review of the code also found that while “all firms have taken positive steps to implement the requirements of the code”, there were key areas for improvement, including in relation to identification of vulnerability and record keeping.

There have been calls for the code to be made mandatory. For example, the consumer group Which? has said that “regulatory oversight of how firms treat victims with regards to reimbursement is much more likely to lead to fairer and more consistent outcomes than we have seen under a voluntary approach”. The House of Commons Treasury Committee has also called for the code to be made compulsory.

In November 2021, the PSR welcomed government plans to legislate to allow it to make reimbursement mandatory. Commenting on the plans, Economic Secretary to the Treasury John Glen said:

Push payment fraud is posing an escalating risk to UK customers, with increasingly sophisticated scams that can be detrimental to people’s lives. The Government’s position is that liability and reimbursement requirements on firms need to be clear so that customers are suitably protected. It is welcome that the Payment Systems Regulator is consulting on measures to that end, and to help prevent these scams from happening in the first place. The Government will also legislate to address any barriers to regulatory action at the earliest opportunity.

Anabel Hoult, chief executive of Which?, called the announcement “a huge win for consumers” and called on the Treasury to act swiftly. UK Finance also welcomed the announcement but highlighted the role of organisations outside of the payments system, such as social media companies and search websites, which it said also “have a key role to play in tackling fraud”.

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