Tuesday, May 30, 2023

Shake-up of UK’s strategy to tackle fraud epidemic

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Ministers have this week set out ambitious plans to deal with the blight of scams affecting UK consumers.

The national fraud strategy, published on Wednesday, outlines measures that the government says will help clamp down on common scams, including cold calls and number spoofing, the practice where fraudsters impersonate the caller ID of trusted institutions to defraud individuals.

More government funding and a promise to have a new fraud service up and running to replace the underperforming Action Fraud this year also feature.

What has made the government act on fraud? 
Fraud, particularly cyber fraud, is a growing threat to consumers, with the Office for National Statistics reporting that it accounted for some 40 per cent of all offences in England and Wales last year.

MPs concerned by the problem claim that ministers and law enforcement have overlooked economic crime. Last year, the House of Commons justice select committee found that only 2 per cent of police funding was dedicated to combating fraud.

Action Fraud, the national fraud reporting service, has also come under particular fire in recent years over its underperformance, growing wait times and reports of victims being misled. Ministers in 2021 announced plans to replace the service.

How will the strategy help people at risk of being scammed?
The government will work with Ofcom, the telecoms regulator, to ban cold calls on all financial products to prevent individuals from being pressed into making fake investments. It is also setting out to ban so-called “Sim farms”, used to send thousands of scam texts.

The plans aim to ensure that vulnerable people who avoid online services, particularly the elderly, can no longer be targeted by fraudsters over the phone. The government has already banned personal injury firms and pension providers from making cold calls.

The measures will need to be robust given the financial incentives for criminals to pursue such scams. Victims reported around £2.35bn in losses to Action Fraud in 2021. Separately, the Office for National Statistics published figures showing that last year one in 15 adults were victims of fraud.

Will I be reimbursed if I’m a victim of fraud?
The strategy includes plans to ensure victims of authorised push payment scams, where a scammer tricks someone into sending them a payment, are reimbursed. These scams have become increasingly sophisticated, with banking lobby group UK Finance reporting around £249mn lost to APP fraud in the first half of 2022.

Earlier plans would have seen social media companies forced to compensate individuals who fell victim to fraudulent content but the measure was removed after industry lobbying.

“If [social media companies] haven’t put safety measures in place maybe they should be liable to pay compensation,” said Louise Abbott, a fraud specialist at Keystone Law. She said clients often fell for investment scams advertised on social media, with crypto a particular challenge.

Abbott said there were routes to compensation for most types of fraud via banks and the Financial Services Compensation Scheme. However, she said this did not apply to crypto scams, where funds were decentralised and fraudsters offered anonymity.

How will changes to Action Fraud affect me?
The replacement for Action Fraud is expected to launch within the year with a “new reporting service” and “upgraded call centre”. As a centralised national service, its successor will remain the first port of call to report UK fraud and cyber crime.

Plans for law enforcement to target low-level scammers will be ineffective, according to Jim Winters, director of economic crime at Nationwide. He said resources should be focused on the “kingpins” running operations.

Intelligence services are expected to take a more prominent role in investigating fraud originating overseas, while 400 “specialist investigators” are to be recruited as part of a new National Fraud Squad.



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