Fraud statistics

by Mark Rowe

The crime statistics for England and Wales for year ending March 2016 as released on July 21 by the Office for National Statistics (ONS) are the topic for Jim Gannon our regular contributor.

In my opinion this comprehensive 49 page document is one that our industry should take note of as it gives a clear indication of crime trends and what we may face.

Of particular interest to me was the overview of fraud in England and Wales produced by John Flatley. The significant rise in UK fraud affecting business and industry is a trend we will have to get used to, and deal with, in the next decade. Many of the perpetrators operate from third world countries out of the reach of law enforcement. Flatley outlines definitions used in fraud statistics for England and Wales and describes the main sources of data. He provides us with a clear overview of what these sources tell us about long term trends, the characteristics of victims and the nature and circumstances of fraud offences.

The report states that fraud involves a person dishonestly and deliberately deceiving a victim for personal gain of property or money. The first established laws on fraud were set out in the First Statute of Westminster in 1275. While fraud is not a new offence, methods have evolved a great deal over recent times with new technology, in particular the internet, providing opportunities for fraudsters to commit crime on an industrial scale, John Flatley writes. However, the fundamental nature of the offence has remained unchanged and the majority of incidents fall under the legal definition of fraud by false representation – where a person makes a representation that they know to be untrue or misleading. This covers a broad range of fraudulent activity, including online shopping and auction scams, lottery scams and inheritance fraud. Most prevalent, however, are banking and payment card frauds which usually involve falsely obtaining personal bank or payment card details, to carry out fraudulent transactions.

There are two main sources used in the Official Statistics on fraud: police recorded crime and the Crime Survey for England and Wales (CSEW). Figures on fraud have long been included in police recorded crime data, but until recently fraud was not covered in the headline estimates from the CSEW. To address this gap, work has now been completed to extend the main victimisation module in the CSEW with new questions on fraud (and computer misuse) added to the survey from October 2015. While these questions have only been included within the CSEW for the second half of the survey year, sufficient data have been gathered to produce first estimates, published as Experimental Statistics in July 2016. These new estimates aim to cover a wide range of frauds involving traditional and more modern methods, including those committed in person, by mail, ‘phone and online.

The report outlines how Information available from each source differs, as does their coverage. The CSEW is a household survey, and as such, information collected is restricted to crimes affecting the resident adult population. In comparison, police recorded crime has broader coverage, including fraud against businesses and other organisations which are not covered by the CSEW. Recorded crime figures encompass fraud offences recorded by Action Fraud (the national fraud and cybercrime reporting centre) as well as two industry bodies, Cifas and Financial Fraud Action UK (FFA UK) who refer offences to the police via the National Fraud Intelligence Bureau (NFIB) based at the City of London Police. However, the main difference between the two sources arises from the fact that most fraud offences do not come to the attention of the police. As a result, police recorded crime data give a very partial picture of the extent of fraud, while CSEW estimates provide a more complete picture of the threat. The fact that it has been disclosed that most fraud offences do not get reported to the police reflects on those statistics presented to show that generally speaking crime is being reduced, when the opposite is more likely to be the case.

Sources of data

Cifas is the UK-wide fraud and crime prevention service, and facilitates fraud data sharing between public and private sector organisations in the UK. Financial Fraud Action UK coordinates fraud prevention activity and manages intelligence-sharing across the financial services industry, feeding intelligence to police and other agencies in support of law enforcement activity.

What are the long-term trends in fraud?

The report states that similar to other types of crime, trends in the number of offences recorded by the police date back to 1898 and indicate how fraud offences increased steadily through the 20th century. John Flatley outlines that while this historic police recorded data gives a good indication of levels of fraud that get reported to the police, changes in recording practices and reporting arrangements make it difficult to interpret trends, particularly over more recent years. For example, changes to the Home Office counting rules (HOCR) in 1998 led to a 61 per cent increase in fraud offences recorded in the following year. Following this, trends were affected by the introduction of both the National Crime Recording Standards (NCRS) in 2002 and the Fraud Act 2006, shown by a period of reductions in the number of police recorded fraud incidents. This decrease may be explained by findings from the 2006 Fraud Review which pointed, among other things, to a lack of understanding by the police as to what constituted fraud, as well as a general lack of capacity or willingness by police forces to accept fraud reports.

Interpreting trends is further complicated by the introduction of Action Fraud who took responsibility for the central recording of fraud offences previously recorded by individual police forces. Given the phased introduction of central recording between April 2011 and March 2013 provides further information. It is not possible to make meaningful year-on-year comparisons over this period. Since April 2014, when comparable data have been available, some rises in fraud have been observed. While it is possible that these increases may reflect improvements in the reporting of fraud amongst the public and members of industry bodies, they may also reflect a genuine increase in fraud offences.

Estimates

Following completion of work to extend the main victimisation module in the Crime Survey for England and Wales (CSEW) to cover fraud and computer misuse, first estimates have been released as experimental statistics as part of the quarterly bulletin ‘Crime in England and Wales, year ending March 2016’. These estimates indicated 5.8 million incidents of fraud and computer misuse were experienced by adults aged 16 and over in England and Wales for the year ending March 2016. Fraud accounted for almost two-thirds of this estimated total (3.8 million offences) with the majority of these relating to bank and credit account fraud – that is, fraudulent access to bank, building society or credit card accounts or fraudulent use of plastic card details (2.5 million incidents). These initial estimates are based on responses to questions that were only included in the second half of the survey year (between October 2015 and March 2016). ONS plan to incorporate these new offences into the headline CSEW estimates for the year ending September 2016 (due to be published in January 2017), when a full year’s interview data will be available. The first full year-on-year comparisons will be available in January 2018, following which trends in the data will begin to emerge.
This data release is a clear indicator of how serious fraud has now become in the UK much of which can be committed by faceless offenders, in front of a computer screen anywhere in the world. The fact remains that fraud is here to stay along with cyber-crime; so do not bury your head in the sand and ignore it.

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