TTF Blog: 12 January 2021

by Alex Varley-Winter, TTF’s Head of Media Relations & Investigative Reporting

Fraudsters are exploiting the tools of unregulated online advertising in lockdown, prompting a call for increased powers to tackle the scourge. A City of London police commander last week explained to MPs why in his view, the police can’t simply ‘arrest ourselves out of’ the UK’s most common crime. It happens so often, and is difficult to trace: “Traditionally there has been an emphasis on reducing criminals,” said Commander Clinton Blackburn of City of London Police. “Preventing people from becoming a victim in the first place is an absolutely vital part of addressing fraud.”

822,000 reports of fraud

Commander Blackburn made the remarks at the latest hearing of the Pension Scams inquiry, a probe that Transparency Task Force campaigned for. You can see a full transcript of the session here and catch up with victims’ testimony here. Last week’s session heard from police and regulators. Blackburn set out that there were around 822,000 reports of fraud in the last financial year in the UK, including ‘nearly 19,000 investment frauds reported to Action Fraud’ in 2020: “We are talking about huge volumes here. Policing has limited resources and competing demands and, sadly, we have to make some very difficult decisions as a result. I do not believe this is an area of crime where we can arrest ourselves out of this offence type.”

Journalism effecting change

By Commander Blackburn’s account, the Times newspaper’s investigation into Action Fraud a couple of years ago, had a big impact. “We do not tolerate what played out in the newspapers in 2019. Some very swift dismissals took place following that and an improvement plan was put in place … Through the City of London police, the Police Authority Board commissioned what is known as the Mackey review and that was published in January 2019. That made 15 recommendations for areas of improvement, eight of which have now been implemented to date.”

I’ve had a little look back at the recommendations at the end of Sir Craig Mackay’s report on Action Fraud, they included that ‘regionally based teams of specialist investigators should be developed’ and that ‘competitive packages should be offered to skilled investigators from the private sector.’ It would be interesting to know more about how Action Fraud, and the framework around it, is changing.

Tip of the iceberg

Nevertheless, it is difficult to see how victims can be well-served with policing structured as it currently is. Graeme Biggar, Director General of the National Economic Crime Centre, flagged up to MPs that “criticisms get heaped on Action Fraud because that is the point where people report to, but it is only one small part of the system. Clinton mentioned the number of reports that are coming in, and now about a third of all crime is reported. Last year it became the biggest single reported crime for the first time and it has less than 1% of police dedicated to looking at it. We have this massive mismatch in the law enforcement, the policing response. Unsurprisingly, that does not lead to brilliant outcomes.”

90 ‘major investigations’

Biggar later explained that “across law enforcement we currently have 90 major investigations into investment fraud—not pension fraud specifically but investment fraud in the round, which will include pension fraud. That is across the Serious Fraud Office, the NCA, the Financial Conduct Authority,all the regional and organised crime units and policing. We are doing our best to try to make sure that those are absolutely the most important cases, that we have done the deconfliction across them to make sure that all the links have been spotted and that we are working across all the agencies to best support all of those cases.

“If we can drive those through, we think we can make more of a material dent in the problem that we are seeing. I hope that helps,” he said.

Pensions watchdog tracking £54M proceeds of crime

Nicola Parish, Executive Director of Frontline Regulation at The Pensions Regulator, told MPs how they were using the Proceeds of Crime Act to try to retrieve squandered funds. “we are looking at scams that we think have taken more than £54 million. That is what the investigation looks like at the moment. We have 44 suspects in 82 schemes and over 18,000 savers.

“We are working with five different police forces, so there is lots of activity, lots of investigations, lots of prosecutions going on, which then gives you the opportunity to use POCA [Proceeds of Crime Act] to get the money back, but it is still very hard to do that.”

Much of Parish’s testimony also pushed prevention as the cure: “Those moneys are dissipated and very often that is what has happened, so it is much better not to hand over the money in the first place.”

Tensions with Tech Giants

The Financial Conduct Authority’s Executive Director of Enforcement, Mark Steward, told the inquiry that social media is fuelling a rise of fraud perpetrated online, and that this should be considered as an Online Harm: “It is clear that social media is largely unregulated in this space and that there are few gateway controls on the admission of advertising into either the search engines or Twitter or with Instagram.

“That is something that concerns us. We have started a dialogue with social media to try to address this, but we do not have any real powers here.”

City watchdog to consult on ‘duty of care’ to consumers

Before Christmas, reviews of the Connaught and London Capital and Finance scandals blasted the UK’s City watchdog, the Financial Conduct Authority, over its historic failures of whistleblowers and victims of investment fraud.

Those scandals again raise the perceived need for a duty of care from financial watchdogs towards proven victims of financial crime or misconduct.

Last week Stephen Timms, Chair of the Pension Scams Inquiry, asked the Mark Steward about this issue.

Timms said: “The FCA has consulted a number of times on the idea of a duty of care for providers, putting that into regulations. That has not happened yet. Why has it not been done?”

Steward replied: “I don’t think we have consulted yet. It remains a high-priority issue for us and we have indicated that we will do something here. We are working on it now. I think there were some delays last year because of all that was happening in the world last year, but we are focused on producing something in the early part of this year for consultation.”

Watch that space. Also, coming up in February the FCA’s former chief, the now-Governor of the Bank of England Andrew Bailey, will be quizzed by Treasury Select Committee MPs on the FCA’s handling of financial scandals.