Fraud in the UK – Part 1 – The Fraud Response for over Five Decades

Fraud in the UK & the UK Fraud Response over the last 5 decades

Fraud has been in existence for more than twenty centuries. This paper summarise the important developments in the response to fraud in the UK over the last 5 decades, as we have moved from the analogue to the digital age, financial fraud has become more prevalent and ever more sophisticated – this ahead of the UK Government’s keenly awaited Fraud Strategy, expected to be published shortly.

Since the late 1980s, advances in technology have seen fraud evolve into more complex forms- from handing out bad cheques and fake currency to replicating credit cards. The internet & other mobile channels such as mobile has changed the world, and it is now available to anyone with access to a computer or smart phone. The availability of online platforms and social media mean criminals can access more of people’s information than ever before and as a result are able to target countless more innocent victims.

There has always been a constant war between perpetrators of fraud and those trying to prevent it. From individuals to organised crime gangs, perpetrators of fraud have always sought to exploit the vulnerability of people and systems. These include the public sector, the private sector, individuals and charities, through use of insiders or other enablers including more recently cyber enablement and identity theft and of course organised crime.

For a detailed chronology over 5 decades of the UK response to Fraud see end of post below, including all sources for data contained in this post. For more on Payment Fraud and Scams in the UK See Here.

The Ecosystem of Fraud

In response, Governments have sought to take action, both to protect the public sector from fraud but also to consider the wider fraud landscape, businesses have reacted as the threat of fraud has increased by increasing costs to prevent and detect fraud, and individuals have had to raise their awareness and protect themselves from the increased risk from fraud.

Looking back over 5 decades, fraud hasn’t always been considered as a significant and growing threat, though estimates for fraud have been increasing year on year. Responses from government and the private sector in the UK at times made a difference, preventing and detecting and recovering or compensating major fraud losses, which regularly now exceed £1 billion or more annually in the private sector alone.

In particular, responses to the highest fraud threats have somewhat effective responses, recognising more can and needs to be done. These are mainly in the public sector focussed in particular in HM Treasury & Work & Pensions & in the private sector focussed in particular in the finance sector in Insurance and Banking. In these sectors the fraud threat is well identified, estimated and actions to measure and target prevention detection and recoveries tracked, with less undetected fraud here than elsewhere. Elsewhere estimates for undetected fraud suggest more needs to be done, in order to stand up an effective response.

5 Principles for combatting Fraud

The International Public Sector Fraud Forum (IPSFF) of which the UK, USA, Canada, Australia & New Zealand are members, recognises there is always going to be fraud but has established 5 principles for public sector fraud, for example; that

  • It is a fact that some individuals will look to make gains where there is opportunity, and organisations need robust processes in place to prevent, detect and respond to fraud and corruption
  • Finding fraud is a good thing, if you don’t find fraud you can’t fight it. This requires a change in perspective so the identification of fraud is viewed as a positive and proactive achievement
  • There is no one solution & addressing fraud needs a holistic response incorporating detection, prevention and redress, underpinned by a strong understanding of risk. It also requires cooperation between organisations under a spirit of collaboration
  • Fraud and corruption are ever changing. Fraud, and counter fraud practices, evolve very quickly and organisations must be agile and change their approach to deal with these evolutions, &
  • Prevention is the most effective way to address fraud and corruption. Preventing fraud through effective counter fraud practices reduces the loss and reputational damage. It also requires less resources than an approach focused on detection and recovery.

These are wise words and are equally applicable to combating all types of Fraud.

Last 5 Decades:

Looking back over the last 5 decades on how the response to fraud in the UK has evolved, it’s clear the attention on fraud has waxed and waned with the rise and fall in public concern and expectations. In particular,

  • in the Eighties, the major fraud related concern led to the Criminal Justice Act 1987 which gave effect to the recommendations in the Lord Roskill’s Fraud Trials Committee report, which led to the creation of the Serious Fraud Office giving it specialist investigative and prosecutorial authority. Another major development was the establishment of CIFAS as a private sector initiative to share data on fraud, suggested by the police in response to challenges and priorities in investigating fraud by the police.
  • In the Nineties, the public sector followed the example of CIFAS, establishing the National Fraud Initiative, which began in 1993 as a pilot with 13 London Borough Councils, matching housing benefit and student awards data & finding 500 cases of fraud. The NFI was then established in 1996 as a government data matching exercise to assist all public bodies to prevent and detect fraud.
  • In the Naughties, much as today, a groundswell of concern about the costs of fraud, limited capacity in investigation in law enforcement, few prosecutions for fraud, limited co-operation, and poor support for victims led to the Fraud Act 2006 and the establishment of much of the Fraud framework that exists today, including the creation of a National Fraud Reporting Centre (now Action Fraud), the formation of a Nation Fraud Strategic Authority (which was closed in 2014); for the City of London Police to become the ‘lead force’ nationally for fraud which would act as an FIU for fraud via a new National Fraud Intelligence Bureau.
  • In the Tens, so called policies of “austerity” following the 2008-2009 financial crises led to falling police numbers and constraints on the public purse more broadly, and to prioritising other areas away from fraud. The National Fraud Authority was closed, Action Fraud was not really fit for purpose and fraud investigations and judicial outcomes for fraud as well as victims support worsened. When COVID 19 hit, the opportunity for fraud fuelled by cybercrime increased further, and targeted the huge support schemes that were provided as well as people’s increased online presence.
  • In the Twenties, the chickens have come home to roost. Fraud is now overwhelmingly the most common crime and a significant generator of financial crime proceeds and losses to the public sector, the private sector and to individuals and this can no longer be ignored,  COVID 19 certainly showed the acute weaknesses in the system, such that a groundswell of concern since has been raised once more and calls for action have reached crescendo levels. 

UK Crime Statistics:

To put fraud into a broader UK crime context as well as focussing in particular on payment fraud and scams the following is relevant, noting the UK adult population estimated at 57 million, an adult in the UK had a 16.8% or 1 in 6 chance of experiencing crime in 2021 with:

  • fraud was the most likely crime against individuals in England and Wales in the year ending June 2022 with 3.8 million estimated number of actual or attempted incidents of fraud comprising 41% (year to June 2022) of all crimes against individuals compared to 30% in the year ending March 2017.
  • fraud crimes affected 6.6% of adults (in England & Wales’s to June 2022) representing a 1 in 15 chance, (with payment fraud and scams the most common – with a 5.8% or 1 in 17 chance of crime
  • thefts of 5.5% or a 1 in 18 chance, of which 3% or a 1 in 33 chance of being a victim of vehicle related theft
  • sexual assault at 2% or 1 in 50 (including attempted offences – year to September 2022
  • illegal drug use at 3 million or 5% (1 in 20 adults) with drug use disorders estimated at 995,002 individuals or effecting 1.7% (1 in 60)
  • domestic abuse effecting an estimated 2.4 million adults (4.2% or 1 in 24) (1.7 million women and 699,000 men)
  • 136,000 (0.24% or 1 in 417) estimated as human trafficking victims (2018)
  • 663 homicide victims at 11 per 1 million people.
  • fraud has taken over from theft as the most common crime in the UK (though fraud usually involves the same elements as theft but is classified separately). Theft rates continue their decades long decline to 2.6 million incidents in 2022 down 20% from March 2020, and down from 5.4 million incidents in 2012 (down 52%) and from the high of 11.5 million incidents in 1995 (down 77%).
  • the declines in theft rates in recent years are being compensated by the rise in fraud and scams. By adding the 3.1 million financial fraud and scam cases to the theft cases, you get to approximately the same levels of theft seen in 2006 at approx 5.7 million cases, which suggests that whilst physical crimes such as theft have seen serial year on year declines these are being replaced  by new forms of theft and reported as fraud and scams carried out remotely.
  • whilst fraud via payment fraud and scams has been the likely fastest growing crime over the last decade, it is no longer, with payment fraud and scam levels plateauing, being replaced in the UK based in recent government crime figures identifying sexual offences rising much at 22% over 18 months to September 2022, with an estimated annual 200,000 cases, of which approx 70,000 were rape cases.
  • estimates for overall fraud vary. A widely accepted estimate of fraud loss was published by the UK’s Association of Chief Police Officers in 2006 estimating a minimum figure for the direct costs of fraud was almost £13 billion. The UK’s National Fraud Authority published 3 estimates during its 4 year existence for years 2010 through to 2013, updating the estimate from £30 billion in 2010 to £39 billion in 2011 to £79 billion in 2012 and to £52 billion in 2013 was down from £73 billion in 2012 and up from £38 billion in 2011. When broken down by sector, the indicator in 2013 revealed that fraud losses to the public sector amounted to £20.6 billion, the private sector lost £21.2 billion, the not-for-profit sector lost £147 million and individuals lost £9.1 billion.
  • according to the Annual Fraud Indicator 2017, which was produced by private sector bodies, fraud was estimated to cost the public sector at least £40.3 billion (21.2%) annually (tax, health, benefit fraud etc) and cost the private sector £140 billion (74%) annually (procurement, payroll, payment fraud etc). Fraud committed directly against individuals was estimated to cost  £6.8 billion (3.6%) with costs to charities of £2.3 billion (1.2%).
  • In June 2021, the House of Commons Public Accounts Committee published a report on Fraud (and error) estimating that in the public sector fraud and error was estimated to cost up to £51.8 billion (range of £29.3 billion to £51.8 billion) every year with £26.8 billion estimated to be in the main tax and benefits systems, for example, in 2020-2021, fraud within the universal credit benefits system rose to an all-time high of 14.5%, or £5.5 billion. The UK Cabinet Office estimates the rest at between £2.5 billion to £25 billion or 0.5% – 5% of non tax and benefit fraud that is likely undetected and affects other government activities and departments. The 0.5% – 5%, “is based on academic research and fraud measurement activities in the US government, the EU and the private sector, and 24 measurement exercises undertaken since 2015 by Cabinet Office across £3.6 billion of expenditure. With approx around £503 billion of UK central government public sector expenditure each year, fraud of £51.8 billion represents about 10.3% overall. Based on findings published in 2021 by the House of Commons Public Accounts Committee (see above) that 10.3% of central UK government expenditure would be estimated subject to fraud or error, with central government expenditure rising to £534.8 billion for 2022/2023 10.3% would represent estimates for public sector fraud losses of £55 billion. With all UK public sector expenditure estimated at £1,182 billion for 2022/2023 10.3% would represent estimates for public sector fraud losses of £131.7 billion
  • with fraud including payment fraud and scams now the most common type of crime they also represent a significant opportunity for organised crime, with proceeds from organised fraud and scams against businesses and the public sector in the UK in (2015/16) estimated in 2019 to be £8.9 billion with £5 billion attributable to organised tax fraud. This compares to the estimated proceeds from drug trafficking of £3.7 billion and of organised acquisitive crime (OAC) of £550 million.
  • cyber crime is a major enabler of fraud; data obtained via data breaches, phishing and malware is used directly to commit fraud, or is sold online to other fraudsters. It is estimated by the UK’s National Crime Agency that the internet plays a role in at least 54% of all fraud.

Reimbursement to Victims

Banks and other FI’s in the UK are required to reimburse customers for unauthorised payment fraud, except in situations where the bank or FI has reason to believe the victim should have been aware that for example payment details had been lost or stolen and had not reported it. As such a bank or FI can only refuse to refund a victim if it has evidence that the victim acted fraudulently, or with ‘gross negligence’, or ‘involving conduct exhibiting a significant degree of carelessness’. A Bank or FI cannot bank can’t say that use of a correct password or Pin proves that the victim authorised a payment, although victims have complained this continues to happen with some Banks and or FI’s. The position for authorised payment fraud or scams is more problematic as usually the victim has approved and or carried out the payment transaction, albeit due to deception. Nevertheless based on a voluntary code introduced in 2019, covering over 90% of authorised payment fraud or scams, has resulted in 182,976 cases being assesses in 2021 with a total value of £467.5 million. According  to UK Finance £238.1 million of these losses were returned to victims under the voluntary code, accounting for 51% of losses in these cases. 1H 2022 figures suggest this number has increased to 56%.

A proposal by the UK Payments Regulator, (the Payment Systems Regulator) will require Banks & FI’s  to reimburse within 48 hours customers scammed and tricked into sending money by deception if the amount exceeds £100 (which will not be reimbursed and is to be the responsibility of the victim. The maximum claim would be a £1 million per payment. The time limit on claims would be no less than 13 months. The PSR plans to introduce the new rules once it has expanded powers, expected sometime in the first half of 2023, and implemented no later than during 2024.

Investigating & Prosecuting Fraud

Only a small proportion of frauds are subject to police investigation. Of the more than 800,000 frauds reported to Action Fraud, CIFAS & UK Finance in 2020/21 only 58,210 were disseminated for further investigation representing a 7% escalation rate. In the year ending September 2021, 7,609 prosecutions for fraud & forgery were started with a conviction rate of 84.9% (6,460). This represents approx 0.73%% of fraud cases reported during the year or 0.17% of all estimated frauds. The numbers of convictions have declined to 6,640 in 2021  compares unfavourably to 10,465 convictions in 2016, and from a high of 15,481 in 2010.

With 1.35 million people going through the UK justice system (in the Year to June 2022), fraud prosecutions represent just 0.56% of total prosecutions, despite being estimated at approx 41% of all UK crimes. Fraud convictions can carry up to 10 years in prison for the most severe cases, however where the amount is less than £5,000 the sentencing guidelines maximum tariff is a 12 month custodial sentence, but most receive a fine or community order.

Resourcing and prioritisation in the police and justice system has been identified as a significant issue for some time, for example in December 2018, the Police Foundation, reported research which revealed that, whilst the police received 277,561 reports of fraud in April 2017 to March 2018, only 8,313 (3%) led to criminal charges, falling to 1.3% if crimes reported by CIFAS and UK Finance are factored in (638,882 reports in total).This compares to 13% of reported crimes overall that result in a charge, summons or community resolution. In their report their research found that: 78% of fraud cases involved a suspect and a victim living in different police force areas, 69% of fraud cases investigated by police were cyber enabled and 43% involved first contact being made online, in 69% of forces all or most fraud investigations were carried out by non-specialist officers, even though the research found that specialist investigators handle cases more effectively, Just 0.8% of the police workforce work in specialist economic crime teams, meaning there is a lack of dedicated resource for dealing with fraud. 

Furthermore, 1 in 13 frauds or 7.7% of cases reported to the police were allocated an investigation in 2017-18. Fraud investigations also take longer than most other criminal investigations. Fraud cases notified to Action Fraud took on average 54 days to disseminate to police forces for investigation. 

The average length of time from reporting to charging for fraud offences was 514 days compared to just 50 days for theft offences. 

Note whilst the Police Foundation reported that  there were 1,455 FTE police personnel working in economic crime in England and Wales, 667 of these were civilian staffs and economic crime covered fraud, money laundering, corruption, etc. In 2017, the total number of police officers in England and Wales was 123,143, which would mean the 788 police officers amounted to 0.6% of police officers dedicated to fraud.


With the benefit of the historical archive, it’s clear policy makers face a fundamental challenge. How is the apparently insatiable demand by the public for more policing, and the public’s reasonable demand that they and their property be better protected, to be satisfied, given that there will need to be continued limits on public spending and that there is concern that what the public demands in terms of extra policing is not likely to have an impact on levels of crime, including for fraud which is commensurate with the added cost or to meet increased public expectations or the threat.  This is the challenge facing the government today and why the focus is on and much is expected of the delayed UK Fraud Strategy

It will take more than just Government to tackle fraud successfully, and the public and private sectors will need to play their parts, in a more joined up way and individuals will have to take more responsibility for protecting themselves from fraud. There is also room for others to do more, including the police, and in the private sector, telecoms and technology, VC, online platforms and social media.  It feels as though we are back almost in 2006, with a consensus around the fraud problem and that big actions need to be taken. Unlike in 2006 thankfully we still have much of the fraud frameworks and infrastructure that was conceived and is still in place which needs to be fixed or improved but would otherwise need to be established from scratch. By looking back through the last decades we may also be able to avoid some of the mistakes of the past this time around, and stick with combatting fraud as a priority for more than 1 or 2 parliaments. 

For a detailed chronology over 5 decades of the UK response to Fraud see Here: U.K. Response to Fraud – Chronology of Fraud

For a PDF version of this post see Here: Fraud Paper 2 U.K. Response over 5 Decades

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