AdvisoryMatters

After the Lords published a detailed report Fighting Fraud: Breaking the Chain in November, Robert Brooker examines the key proposals and their likely impact.

The House of Lords Select Committee on Digital Fraud and the Fraud Act 2006 produced its in-depth report last autumn. We hope this achieves more than just telling us what we already knew. Instead, it should expose the UK’s failure to fight fraud and summarise what needs to be done, much of which was already highlighted in the Economic Crime and Online Safety Bills.

So, what was the catalyst for this report? Fraud & cybercrime make up 41% of all crime committed in the UK, but only 1% of the policing budget is dedicated to combatting economic crime. Fraud levels are higher than pre-pandemic and data sources suggest losses are as high as £4 billion over the last year.

Astonishingly, this means everyone over 16 is more likely to be a victim of fraud than any other type of crime. That includes violence, robbery or burglary.

The proposal that’s attracted the most coverage is Companies House reform. But from a fraud and forensic perspective, at a granular level, I feel some of the other changes put forward are more significant in terms of corporate liability. That’s because they will ensure organisations take responsibility for preventing fraud, and failure to do so may mean individuals (as well as the organisation) are subject to prosecution and large fines. This would be a good deterrent for all who still choose to ignore their responsibilities. It was intriguing to see the Government plans to take its own versions of the amendments to the House of Lords. These are likely to be based on similar ‘failure to prevent’ offences for bribery and tax evasion.

What are the key proposals?

• A new cabinet-level sub-committee for fraud prevention chaired by the Security Minister. This would commit the Secretary of State to create an economic crime committee to examine and oversee regulatory, enforcement and supervisory action against economic crime.
• Introduction of a new offence of ‘failure to prevent fraud, false accounting or money laundering’. This will be a new criminal corporate offence, in a similar way to that of S7 of the Bribery Act 2010, leading to significant financial penalties for organisations’ behaviour. It will improve accountability regarding fraud. An organisation will be seen to commit an economic crime offence where it is committed with the consent, participation or neglect of a senior manager or senior managers. There will also be an individual criminal liability for corporate officers who take a decision, or fail to take a decision, that knowingly results in an offence being committed.
• A Government-led, centrally-funded consumer awareness campaign in partnership with industry to raise UK awareness on digital fraud.
• An urgent re-introduction of the Online Safety Bill to Parliament.
• Introduction of a delay of no more than several hours on high-risk payments, to stop fraudsters cashing out stolen funds.

It’s great to have gained momentum with these proposals, as the subject of how to tackle fraud effectively has rumbled on for some time. So we hope the legislation will go through. As for the impact it will have, that will depend on the legislative detail, how it will be implemented and who will prosecute.

I feel this is the biggest, most impactful legislative change relating to fraud since the introduction of the Bribery Act some 13 years ago. Interestingly, the main focus of conversation in Government seems to be the ‘enablers’ (lawyers and accountants). But I’m certain the legislation will have a large impact on organisations and their customers/clients, forcing them to do what is needed to avoid being victims of fraud – particularly the banks.

If you would like further guidance on issues raised in this article, please contact Robert Brooker.

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