A Collaborative Approach to Fighting Financial Crime
People see fraud as a victimless crime but we know that’s not true – it has a huge and devastating effect on families and can ruin lives. By being here today we are saying that it is a matter of importance and not just to you personally but also to business. Unless we act in partnership, the public and private sector sharing information we cannot make the UK more resilient to this threat – working together is the key.
I trust there will not be many of you, now, who have not encountered the Government Fraud Review. Since this was commissioned by my predecessor and the then Chief Secretary in 2005, I’m pleased to say that we have moved on with implementing the key recommendations.
And happily, in support of the theme of today’s conference, one of the key observations and recommendations from the Review was that a government-led and co-ordinated approach between the public and private sectors was absolutely essential if we are to make a significant impact on curbing the fraud economy.
Equally, the Review recommended that we shift our current efforts away from reactive to proactive approaches to combating fraud, which will be achieved through the delivery of the first ever, truly national fraud strategy.
Government has emphatically supported the realisation of some of the Review’s key recommendations with our investment of nearly £29m over the next three years to establish the key counter-fraud architecture required to support the successful delivery of the strategy. Many thought that there would not be this level of commitment.
Work’s begun in earnest on this ambitious programme. To reflect the move from discourse to delivery, we’ve re-named what was the Fraud Review as the National Fraud Programme.
This programme is designed to harness the collaborative enthusiasm – and I can assure you that there is a lot of enthusiasm, resources, authority and power contained in the public and private sectors’ efforts to fight fraud across the whole gamut of counter-fraud activity – from prevention and deterrence through to detection, investigation, prosecution and sanctioning – to redress for victims.
I have to tell you, I’m pleased to be leading and championing this work. Fraud is an insidious crime that causes great financial and emotional distress for its victims. Make no mistake, we’re all victims, if not directly, then indirectly, by the way:
So we’re all affected by fraud in some way or another. And if any of us feels that they can tolerate these vulnerabilities that enable this crime to be committed, on the premise that “someone else is paying the bill,” that’s just plain wrong and allows the threat to incubate – and hit us harder in the future.
Recently more of my colleagues have joined me in leading the fight-back against fraudsters, through an inter-Ministerial Group I convened in March with my colleague, Vernon Coaker, Minster of State at the Home Office. Along with colleagues from the Treasury, Cabinet Office, the Department for Business Enterprise & Regulatory Reform (BERR), the Ministry of Justice and the Department of Work and Pensions, we are all committed to working across the economy to harden this country as a target.
While this inter-Ministerial Group is a clear indication of public sector interest in this issue, I cannot stress enough that the National Fraud Programme is a public/private partnership. Along with government departments and agencies, organisations such as the British Bankers’ Association, regulators, the Association of British Insurers, along with the professions, local authorities, prosecutors, the courts and the police, are stepping up the fight. Not that their involvement or some of the partnerships within and between the public and private sectors are brand new. In some cases, we’ve been working together for some time. But the difference this time is that we’re aiming to strengthen the co-ordination and work to an agreed set of priorities.
We’ve also worked together to prepare the detailed business cases needed for the Treasury – and now to establish the four principal institutions that together will devise, support and deliver the National Fraud Programme, across the country. These organisations are:
Working collaboratively, these bodies will be responsible for developing and delivering the national counter-fraud strategy, for the knowledge management that will drive it – and for the co-ordinated public and private sector activity that will co-ordinate all the counter-fraud efforts in operation across our economy into a single, informed response to the fraud menace.
Let me bring you up-to-date with where we have got to in establishing these organisations.
The National Fraud Strategic Authority (NFSA) is a bit of a ‘Ronseal’ organisation as it is being designed to do exactly what it says on the tin: act nationally to counter fraud through a strategic and authoritative approach.
The NFSA will act as a co-ordinating body, providing a national and international focus for the anti-fraud policies or activities already in place within the public and private sectors, with the overall aim of making the UK a hostile environment for fraudsters.
The NFSA will also co-ordinate national counter-fraud activity, with a clear focus on reducing overlaps, removing conflicts and closing gaps in counter-fraud activity. It’s not all about correcting problems, the NFSA will also share intelligence and spread best practice in detection and prevention. All this will be done with the aim of increasing the effectiveness of fraud deterrence, which will, in turn we hope, reduce our reliance on more expensive criminal investigations and prosecutions.
From its strategic position, the NFSA will be best-placed to inform and propose our development of policy and legislation – and other changes, which will be necessary to further toughen the tools available to combat fraud.
The NFSA will also be responsible for raising public awareness of fraud techniques and promoting simple counter-fraud methods.
To do all this work the NFSA is going to have work fluidly and determinedly employing non-traditional techniques in some cases to remedy some traditional challenges and create new opportunities.
While the NFSA is still very much in development at the moment, our inter-Ministerial Group has already given the development team some priorities to work on to actively test their models and structures before they go operational towards the end of this year.
Task forces are already underway to address the presence of mortgage fraud and e-crime in our economy and the team is working across the economy to analyse these issues, identify the areas where improvements are required and current good practice can be enhanced and shared. I should say the co-operation the team’s received from players across the economy has been excellent. People have been willing to look at these problems in new ways.
We all know there is a wide range of law enforcement priorities and last year the Home Office undertook a consultation on their new Assessments of Policing and Community Safety performance indicators, otherwise known as APACS.
By working with Ministers, departments, regulators and private sector organisations, the development team made a submission to the Home Office to include fraud in these performance indicators.
I’m pleased to confirm that as a result of that joined-up effort, the Home Office has confirmed that they’re looking at introducing the fraud performance indicator in the 2009-2010 APACS.
We’ll continue to work with stakeholders to develop this indicator but this is clearly an example where leadership enabled a united counter-fraud voice to be heard.
I should make it clear at this stage that the NFSA will not require any legislation or statutory powers in its establishment – it will harness existing powers and responsibilities from all the organisations in the task force and co-ordinate actions that would probably have taken alone by these organisations previously. Consequently the NFSA won’t be usurping individual organisations’ current counter-fraud policies or replacing them with central direction.
Collaboration increases the power of individual efforts and co-ordination ensures we act together, learn from one another – and collectively agree our priorities for action.
There’s increasing awareness across the financial crime agenda of the power of modern intelligence sharing and analysis. Recent announcements by the Audit Commission on the findings being generated through the National Fraud Initiative illustrates the insights that can be generated through correlating information to create meaningful intelligence.
The National Fraud Reporting Centre (NFRC) and its Intelligence Bureau will provide the analytical hub for fraud information, receiving and managing both information and intelligence on fraud that at the moment is fragmented within both the public and private sectors.
Managed by the City of London Police, the NFRC will be staffed by both civilian intelligence analysts and law enforcement officers to provide:
The NFRC is also going to provide a much-needed central point of contact for individual victims’ reports of fraud. Every fraud report received in the NFRC will contribute to building a more accurate picture of fraud, improve the effectiveness of the wider anti-fraud response and inform the development of the National Fraud Strategy.
Because of the amount and variety of information we aim to capture and analyse in the NFRC, it is being designed with the help of the Information Commissioner’s Office. In this way we aim to ensure we capture and use information to the fullest possible extent for crime prevention and investigation purposes, within the parameters of the law.
Now, this is an important fact, as we are clear that not every report made to the NFRC can be investigated by the police, Serious Fraud Office (SFO) or the Serious Organised Crime Agency (SOCA). But, as I have said, each and every report builds up a richer, more useful picture of fraud, strengthen analysis and highlight trends. Harnessing the detail of fraud activity is essential to understanding the issue better so we can act more intelligently and effectively. So the vital thing is that we ensure no information or victim’s complaint is wasted.
I should reiterate at this point that we have no desire to re-invent or replace processes that are currently in place to support fraud victims, but that information can also be used to support positive activity by the police, regulators, other banks – and the NFSA.
But we believe that by positive action we’re talking about a range of measures, preventive and deterrent undertaken by the state and private industry, regulators and individual victims. So alongside criminal investigations and prosecutions, we can utilise civil proceedings, judicial declarations, negative publicity, disciplinary fines, asset recovery, changing a system, sacking an individual or closing down a website. All these tools are available to us when we act together.
Supporting all this will be the NFSA’s measurement and analysis unit which is aiming to record and analyse which interventions and actions are making make the most impact on fraud and reduce the harm caused by fraud. The NFRC will be producing threat assessments from analysed complaints – so informing the next collective, pre-emptive strike.
Another tool at our disposal is the National Lead Force for fraud, which is starting to operate within the City of London Police. This new responsibility builds on the strong work being delivered through its role as the South East’s Lead Force – a role that has recently seen the Force, in co-operation with other forces in the South, arrest five men and one woman as part of an ongoing investigation into boiler room fraud, which is estimated to have affected over 1,200 people.
Through funding provided by Treasury and the Corporation of the City of London, the force has been able to start recruiting three new teams of fraud investigators.
Let me be clear, as with measures, the Lead Force will not replace regional fraud squads, but will increase our national fraud investigation capacity by providing:
New priorities and more officers are all welcome and useful, but we also need to ensure that after detection and arrest has been successfully completed the criminal justice system can provide effective, efficient sanction and redress.
Last month I issued a consultation paper on our proposed framework for plea negotiations in England and Wales. This framework of principle has been drafted by a working group of senior court practitioners led by Stephen Hockman, QC – a former chairman of the Bar. Quite simply, the object of the framework is to encourage the prosecution and defence – traditionally constrained from working together by our adversarial system – to discuss the practicalities of a guilty plea at the earliest possible opportunity, before charges are even brought in some cases.
I cannot pre-judge the outcome of this public consultation, but we have in mind to provide Attorney General’s Guidelines to complement the Framework, to ensure that prosecution, defence and vitally victims and witnesses too are provided with an open and transparent ‘code’ for arriving at an agreed plea and sentence package to present to the Court.
We all know the larger and more complex fraud cases are expensive to investigate, prosecute and present to court. They impose a heavy burden on the police, law enforcement agencies, witnesses, victims and defendants as well as the court itself. These cases can consume a disproportionate share of legal aid resources. If we can save investigation and trial time in even a few cases a year, it will be a considerable achievement.
Linked to this consultation (which closes on 3 July 2008), we are currently drafting a second paper, which will propose new powers for the Crown Court in dealing with criminal fraud. The Fraud Review recommended that the Crown Court should be equipped to make more preventive and deterrent orders. Some of those outlined are only available to the civil courts or in regulatory proceedings currently. For example:
These linked proposals will, if agreed, both empower a Crown Court to impose a package of sentencing orders that satisfies the needs of victims and defendants for comprehensive justice. It will provide greater certainty for defendants pleading guilty, by reducing the number of potential parallel or serial cases they may otherwise face. We hope to issue this second consultation paper before the summer and I would urge you all to contribute your views and ideas on both papers.
Meanwhile, another working group of court practitioners, led by Martin Jones, the head of Criminal Justice Policy at HM Courts Service, is commissioning the first full study of the impact of fraud cases on the civil and criminal courts. This will inform a proper consideration of the cost/benefits of a financial court jurisdiction for fraud cases and other proposals made in the original Fraud Review for co-ordinating efficiently the parallel civil and criminal proceedings that so often result from incidents of fraud.
Alongside the Fraud Review, the Government has also been making other changes in relation to fraud. Last year the Fraud Act 2006 came into force and we are already feeling the benefits of a simple, easily understood single offence of fraud to replace the collection of amendments that had been accumulated by the Theft Act 1968.
The Government is also consulting on the new Asset Recovery Strategy and the Serious Crimes Act 2007, which recently received Royal Assent, contains a number of measures that will enable prosecutors to bring civil proceedings for confiscation of criminally derived assets and will affect how the courts deal with fraud – to name but two elements. In particular, the courts will be able to impose wide-ranging serious crime prevention orders to restrict an offender’s business and professional activities where this is necessary to protect the public from future offences.
The change of approach heralded by the National Fraud Programme brings a greater emphasis on prevention and deterrence. This strategic shift of effort will be supported by the justice system as well as by the precautionary efforts of the state, businesses and the public. Just as taking the profit out of crime weakens criminal motives, so removing the offender from the commercial or professional arena of his fraudulent activity reduces his opportunity and incentive to offend again.