Case Studies

Online fraud report

by Mark Rowe

Online fraud is now the most commonly experienced crime in England and Wales, but has been overlooked by government, law enforcement and industry; the Home Office’s response is not proportionate to the threat, according to the National Audit Office (NAO) in a report.

The report largely covers the nature and scale of the crime, which it described as ‘growing rapidly’; and the UK Government’s response. It notes that while the true cost – financial and emotional – of online fraud is unknown, it’s likely to be billions of pounds. The NAO noted that in February 2016 the Home Office, as the responsible government department, did set up the Joint Fraud Taskforce, which the auditors saw as a positive step. But, it has too narrow a focus, on banking, according to the NAO, and it’s relying on voluntary participation from industry and law enforcement; and the banking sector’s response is described as ‘uneven’. The NAO called for the Taskforce to take in the retail and digital sectors, and to publish its performance and plans, intelligence gaps to be filled, and good practice identified and shared.

The official auditors found no clear mechanism for identifying, developing and sharing good practice to prevent people becoming victims. There are examples of good practice in protecting people against online fraud, such as Sussex Police’s initiative to help bodies such as banks and charities identify potential victims.

Amyas Morse, head of the National Audit Office, said: “For too long, as a low value but high volume crime, online fraud has been overlooked by government, law enforcement and industry. It is now the most commonly experienced crime in England and Wales and demands an urgent response. While the Department is not solely responsible for reducing and preventing online fraud, it is the only body that can oversee the system and lead change. The launch of the Joint Fraud Taskforce in February 2016 was a positive step, but there is still much work to be done. At this stage it is hard to judge that the response to online fraud is proportionate, efficient or effective.”

The report points to the nature of online fraud that makes it difficult to pursue and prosecute criminals. In addition, there is a lack of data on how many fraudsters are prosecuted and judicial outcomes for fraud offences; there are also concerns about the sentences fraudsters receive. Although the government wants the police and judiciary to make greater use of existing laws, the NAO found that stakeholders had mixed views on the adequacy of UK legislation. The international and hidden nature of online fraud makes it difficult to pursue and prosecute criminals because of the need for international cooperation and an ability to take action across borders. The report noted that fewer than one in 150 police officers’ main function was economic crime.

As for the banks, the report could not find any consistent reporting of fraud in major banks’ annual reports and accounts, and there is no public information on losses incurred by individual banks, except an aggregate figure produced by Financial Fraud Action UK, a membership body.

For the full 50-page report visit https://www.nao.org.uk/wp-content/uploads/2017/06/Online-Fraud.pdf.

Comment

At the trade body the British Retail Consortium (BRC), Tom Ironside, Director for Business and Regulation said: “The report correctly identifies the scale and complexity of this growing problem including the risks to the retail industry. We welcome the recognition of the need for retailers to be fully integrated into the UK’s response. The BRC’s 2017 crime survey found that fraud costs retailers around £183m in 2015/16, around 53pc of which is cyber-enabled. To address this, the retail industry strongly supports a much closer partnership between the Government, law enforcement and industry to tackle online fraud. We look forward to continuing to work with the Home Office and other stakeholders in addressing this challenge for the benefit of retailers and the customers they serve.”

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