For some time there has been a general feeling held by public and private sector fraud practitioners that the issue of fraud in the UK was not treated as seriously as it should. Campaigns by bodies such as the Association of Chief Police Officers (“ACPO”), the highly successful regional fraud fora and many others, have gradually raised both the public and the Government’s  awareness of the serious threat that fraud is to individuals, organisations and the economy as a whole. As a result the Government commissioned a 2006 Fraud Review following which in 2008 the Attorney General’s office ring fenced a budget of £29 million to establish a National Strategic Fraud Authority (“NSFA”). Somewhere along the line the new body changed its name to the National Fraud Authority (“NFA”) with a dedicated website at: http://www.attorneygeneral.gov.uk/nfa

There has been little news in the ensuing period concerning the NFA’s activities. Appointments of interim and permanent chief executives were well advertised as with all political posts. One of the first outputs seems to be a survey of the level of fraud in the UK that was published in January 2010. It was this survey that announced that fraud cost the UK some £30.2 billion per year that reminded me of the NFA’s existence and made me wonder what they were currently doing to help deal with the problem of fraud.

It does seem that one of the Authority’s tasks is to roll out details of the progress that they are making together with the general anti-fraud message at various relevant gatherings around the UK. These include speaking slots at the different Fraud Fora events that are held around the country. Therefore it was with much interest that the North West Fraud Forum’s annual conference was attended on 11 February 2010 at the DeVere Whites Hotel in Bolton.

Two out of three talks during the morning session were related to the NFA. However, the very first talk was on a different subject – an interesting piece by Lancashire MP Rosie Cooper, who related a personal experience of identity theft fraud. The talk highlighted the weak and ineffective response the authorities  have historically made to reports of such fraud and Rosie and the audience (which included over 100 respected public and private sector fraud practitioners from around the UK) eagerly awaited the NFA’s report as to how their new thrust would help frustrated victims of fraud like Rosie.

Unfortunately the NFA’s chief executive Dr Bernard Herdan could not make the conference and a last minute substitute of his colleague Cordia Lewis was made. Cordia was an Australian librarian with an MBA. She began her talk be reiterating private sector fraud statistics that had been compiled by the leading accountancy firm KPMG.

Her speech included details of the NFA’s intention to compile a regular Annual Fraud Indicator and an update of the newly established fraud reporting functions of “Action Fraud” for individuals and SMEs or the “National Fraud Intelligence Bureau” for larger organisations and fraud regulators.

Her message was - that if Rosie had experienced identity fraud now she would be able to report the matter to Action Fraud. However, this caused a storm of response from the audience with questions along the line of “do we stop reporting fraud to the police?” and “is this not another level of beaurocracy being inserted into the system?”

The next speaker had a recent example of how the reporting process worked.  Detective Superintendent Steve Clarke of the City of London Police headed up one of this squad’s six fraud groups and which was also the lead force in the coordinating the efforts of the NFA. He also headed up the NFA’s National Fraud Intelligence Bureau – the reporting point for major frauds. Steve related the case of Focus Clothing which the City of London is now investigating. This case which has been in the news resulted from over 50 calls to the NFA’s fraud helpline from individuals who had not received goods they had bought online from Focus.

It does seem that there is a lot of talk and good intentions from the NFA but certainly the audience at the North West Fraud Forum were not convinced that reporting a fraud to them would result in any more action than if the fraud was reported to the police or other front line fraud regulator. I discussed the matter with a solicitor, a government company inspector and a private sector fraud investigator all on my table at the conference. Together with my own views as a forensic accountant specialising in fraud matters, the consensus was that the £29 million would be better spent on funding more dedicated fraud squad officers in the various regional police forces!  Only time will tell.

By: Mark Jenner – Forensic Accountant

According to the Federation of Small Businesses (FSB) some 20% of all crime takes place on business premises. When you think of all the theft, murder, drugs and the like, this is an awful lot of crime!

The reason of course is that businesses are the target for all forms of fraud – employee fraud, creditor fraud, supplier fraud, Internet fraud…the list can go on. You should not wait until your business becomes a victim as it inevitably will at some point, do something about it now.

Apart from the obvious security issues for your assets, you need to put together a fraud reduction strategy that will help protect your business from various types of fraud, phishing, pharming, identity theft plus hacking and virus threats to your IT systems.

Your data needs protecting also. Even apparently simple information such as your customer lists are valuable and you do not want your employees giving it to your competitors. The data can also be lost through burglary and criminal damage to your premises. Think of the effort that would be required trying to recreate this information.

Remember to vet your employees when recruiting. You want trustworthy workers who will not put your business and assets at risk. Resumes very often contain falsehoods, and at best exaggerations. Make sure you take up references, check periods of employment and question what an applicant was doing in a “gap” period. Perhaps they were doing time at Her Majesty’s pleasure for fraud! Yes fraudulent employees do commit the same crimes time and time again, moving from one complacent employer to another.

Complacency is the name of the game when it comes to fraud risk. Although it does not always pay to be overly oppressive in your anti-fraud policy and cause resentment and even fear amongst your staff, a tightly controlled work place will undoubtedly prevent the fraudster striking or at least make him think twice before having a go.

Mark Jenner is a forensic accountant and fraud expert advising companies on cost effective ways of preventing fraud.

For there to be a meaningful fight against fraud there needs to be a legal system capable of dealing with the cases brought by the prosecution authorities. There is no point beefing up the police fraud squads and giving them resources (which should include adequate funding for forensic accountants) to investigate fraudulent activity if the cases are going to falter at court.

Why would they do that? If a criminal trial is not managed properly and proportionately it will either fail completely leading to a re-trial or an appeal. This happens a lot and is the biggest reason why costs of dealing with criminals in general are so high.

The Legal Services Commission comes under fire a lot – not just from this blog site! The Daily Mail yesterday (2nd February 2009) reported the gross waste of public funds by the LSC. Audits have revealed that they have paid some £25 million too much to criminal defence lawyers over the year. If a public auditor is able to uncover £25 million wasted out of a budget of £2 billion per anum then just think how much a proper fraud investigator would find!

This may sound a bit of a sweeping statement, and is based purely on anecdotal evidence. But do not forget that as a forensic accountant I not only get paid for a lot of my work by the Legal Services Commission but also deal very closely with firms of solicitors and barristers that do also. Yes I do see some barristers getting paid £1 million each year from public funds, but I also struggle myself to receive ordinary market rates for my own work.

Sometimes I must argue my case with an LSC case worker that is questioning a quotation that I have submitted. Having done these sorts of jobs for over 15 years I usually have a good idea of how long they will take and what resources I will need to apply. It is not always easy to translate these ideas into a recipe for my costs and sometimes have to argue whether or not each of 10,000 documents will require 20 or 25 seconds to review! I know that I will need a week and a half or so but putting it into simple science is not always so easy.

Apparently since the 1980s spending by the LSC has multiplied 7 fold. Its not surprising – forget the published inflation figures – in 1983 we bought a house for a price that we would easily have to pay 12 times more for now. That aside, the past decade or so has seen the labour government increase the amount of legislation in place many times. The Proceeds of Crime Act 2002 is only one example of many new laws that were introduced, were lengthy and ill conceived. They have led to substantially more work needed to be done by the Defence solicitors and barristers to prevent miscarriage of justice. I have assisted in some of this and know how much time can be wasted by the Crown.

I would rather be putting the fraudsters away any day, but am happy to present a truly interdependent stance within my Fraud Advisory Services work portfolio and act as expert accounting witness for the defense in white collar crime cases. Because the Crown tends not to prepare financial cases in a safe fashion, often by not utilizing forensic accountants, there is much scope for checking and representing the case by the defense. My work in this area is not intended to get the dguilty off, but ensure that their case is presented at an accurate level of severity so that the courts can award a just sentence. If the LSC continue to be criticized for waste and their budgets cut accordingly, who will be doing the essential fraud defence work to balance the system?