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The UK Fraud Strategy – what does it mean for the Public Sector?

Author: Julie Hewitt
Date: May 2023

This week saw the long awaited Fraud Strategy[1] release. Set to mark a ‘fundamental shift’ in the approach to tackling fraud, the report describes how it will pursue and block fraudsters and empower the public. But in the light of the recent reports from auditors, what does this mean for the public sector? In this blog I look at the implications for the public sector as a whole.

Fraud now accounts for over 40% of all offences in England and Wales. Estimated fraud against the public sector is £33.2 bn to £58.8bn. The fraud risk threatens our national and economic security, enabling terrorism and organised crime[2].

To fight this, the Government has committed £400m to tackling economic crime[3], of which £100m will be used to ‘bolster’ law enforcement. This includes the launch of a new National Fraud Squad with 400 specialist investigators and making fraud a priority for the police. The UK intelligence community will be used and will lead a new global partnership to fight fraudsters internationally.

The aim is to cut fraud by 10% from the 2019 pre-Covid levels by the end of this Parliament. Action Fraud is to be replaced with a £30m investment over three years to “replace and improve” the service.

What impact will this have on the public sector?

Funding

The bar is set high with many statements throughout the report about what needs to be done. Funding has been provided with the £400m pledge in the Economic Crime Plan 2[4] from which £100m is to improve the law enforcement, intelligence community and criminal justice system response – a challenging feat – for 2024/25. This funding needs to be used wisely as its not a huge amount given the impending work to be done.

Responsibility for fraud

The responsibility for fraud spans several divisions within the public sector, with the Home Office owning the overall policy and strategic lead and the National Crime Agency’s National Economic Crime Centre (NECC) as the operational lead across law enforcement. This filters down to Regional Organised Crime Units (ROCU’s), and local police forces. Complex frauds will be tackled by the Serious Fraud Office (SFO). Together they will create the new National Fraud Squad and make fraud a priority through the Strategic Policing Requirement.

The Government response[5] to Breaking the Chain report agreed that fraud should be written into the Strategic Policing Requirement (SPR). The February 2023[6] version, however, does not have fraud as one of its seven threats, so seems to have gone ignored. Terrorism financing and its links to fraud have also been omitted.

While this sounds the right way to go, in the House of Lords report “Fighting Fraud – Breaking the Chain[7]” report, it states the organisational structure for public sector investigation of fraud is complex and confusing – “an alphabet soup of responsible bodies[8]. It listed eight departments with responsibilities for fraud, not including the Public Sector Fraud Authority as it was only just set up. Counter-fraud policy is spread across a “complicated map” made up of multiple departments, taskforces and Ministers- which “results in a plethora of agencies and bodies, a vacuum of responsibility and a culture of blame-shifting”.

So, it seems that report – published in November 2022 – has had an impact here. It states there should be a review of fraud law enforcement, “assessing the impact the additional posts have made and whether more substantial structural reform is needed”. It will be interesting to see how this pans out, given the recent issues with policing as discussed in the Casey Review[9], reforms may be on the cards across the public sector.

Stakeholders

The Fraud Strategy will be delivered by a close partnership of three stakeholder groups –

  1. Cross-government partners, agencies and regulatory authorities;
  2. Law enforcement partners;
  3. Partners across industry and the private sector.

This is not the first mention of industry and private sector being involved in the fight against fraud.

Government is committed to do more to fight fraud committed against

the public sector and has utilised counter fraud experts from around government,

the private sector and international partners[10].

“Breaking the Chain[11]” report stated, “the effect of such under-prioritisation has been to create a permissive culture across Government and law enforcement agencies towards fraud and the criminals who perpetrate it”, believing this to seep through to the attitudes of the private sector involved in the fraud chain and are seemingly not preventing consumers being scammed.

Given the issues with the number of stakeholders involved from the public sector, adding in the private sector could be challenging. Hopefully the central bodies – Home Office and the new National Fraud Squad can review how the private sector can be included – ensuring they make full use of the skills, expertise and technology available.

Measuring the success

The ambition to cut fraud by 10% from 2019m levels is tough. The Home Office will engage with industry, academic experts and stakeholders to “strengthen the data and measures to track progress”. This is very much needed, as the report from the National Audit Office (NAO) “Tackling Fraud and Corruption against Government[12]” found a “large disparity between the level of fraud and error that the UK government reports”. The estimate from the Public Sector Fraud Authority (PSFA) is £33.2 bn to £58.8bn – a wide disparity due to the ‘inherent uncertainty’ over the extent of fraud and error as they are not certain of which areas of Government spending are vulnerable outside of tax and welfare.

But that’s tackling fraud against the public sector. Measuring the impact of industry in preventing fraud is through the Joint Fraud Taskforce (JFT) who plan to set new voluntary targets for companies to reduce fraud. This was noted in the recent meeting minutes[13], “All sectors agreed with Home Office proposal to set a baseline. However, members noted the need for a credible estimate of fraud which would help show where industry and others should be investing resource”.

There is clearly more work to be done in detecting and measuring fraud, regardless of it being against the public sector or the general public and companies.

Data Sharing

  • Government will continue to work with all sectors and partners to maximise data sharing mechanisms, including through legislation.
  • Support the Public Sector Fraud Authority by sharing data and threat assessment insight.

Data sharing is key.  The Digital Economy Act (DEA) 2017 has not been used to its full advantage – it permits data and intelligence sharing for fraud and error purposes, but on the face of the evidence, HMG departments are still losing this fight.

The DEA has, so far, not given departments the reassurance they need to be confident about sharing data legally. Our discussions with departments have shown us that they would welcome more support on how to use the Act appropriately to support data-sharing. (see our briefing paper “When can Government organisations and law enforcement agencies share date and for what purposes at https://synalogik.com/whitepaper/when-can-government-organisations-and-law-enforcement-agencies-share-data-and-for-what-purposes/ ).

Some departments use information sharing agreements under GDPR Part 5, but this can be a lengthy process, with approval required from the Delivery Review Board – this acts as a disincentive to pursuing data-sharing opportunities.[14]

I find it interesting that the report highlights data sharing as a cross government capability – as this requires a platform(s) in which to share data. This is hindered by outdated IT systems and a general lack of digital transformation – as found in the “Digital Transformation – addressing the barriers to efficiency[15]” report. This report considered the digital transformation of the governments system and progress made to date. It stated that this is “instrumental in achieving efficiencies, with huge gains to be achieved…..there are many challenges, and these will take many years to overcome”.

It recognises that across government many of the IT systems are outdated “legacy systems” and a key source of inefficiency, creating a major constraint to improving and modernising the services.

In conclusion

We must

….get the technical ability to share data – across the public sector and with industry and the private sector – that will have a dramatic effect on fighting fraud as we would finally be able to see the big picture,

….use the funding wisely to bring together the right people across government and law enforcement,

…..create an effective measuring tool with a baseline,

…..put into action the words stated,

….get the right technology in place to help – let’s not forget the goal is only to reduce the total amount of fraud by 10%, indicating the scale and size of the problem, when this combines with a lack of resources, it is even more imperative to ensure there is the right technology to help investigators with the efficacy of investigations.

So we might just be able meet that 10% target and make the UK a safer place for us all.

[1]https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1154660/Fraud_Strategy_2023.pdf

[2] Government’s 2021 Integrated Review of Security, Defence, Development and Foreign Policy

[3] https://www.gov.uk/government/publications/economic-crime-plan-2023-to-2026

[4] https://www.gov.uk/government/publications/economic-crime-plan-2023-to-2026

[5] chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/https://committees.parliament.uk/publications/34321/documents/188908/default/

[6]https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1138740/20230223_Strategic_Policing_Requirement__V1.2__-_OS.pdf

[7] committees.parliament.uk/publications/34321/documents/188908/default/

[8] Report of Session 2022-23 – published 12 November 2022 – HL Paper 87

[9] www.met.police.uk/SysSiteAssets/media/downloads/met/about-us/baroness-casey-review/update-march-2023/baroness-casey-review-march-2023.pdf

[10] https://acrobat.adobe.com/link/review?uri=urn:aaid:scds:US:c13089cf-733f-44fa-a051-d83d1196fcd3

[11] committees.parliament.uk/publications/34321/documents/188908/default/

[12] www.nao.org.uk/wp-content/uploads/2023/03/tackling-fraud-and-corruption-against-government.pdf

[13] https://www.gov.uk/government/publications/joint-fraud-taskforce-management-board-minutes-2022/joint-fraud-taskforce-board-minutes-21-november-2022

[14] https://www.nao.org.uk/wp-content/uploads/2019/06/Challenges-in-using-data-across-government.pdf

[15] www.nao.org.uk/wp-content/uploads/2023/03/digital-transformation-in-government.pdf

Julie Hewitt
Julie spent 17 years working in the Public Sector, Firstly in the Health & Safety Executive, then HM Revenue & Customs, where she worked as an Information consultant, and latterly as Data Contracts manager, supporting the procurement and delivery of HMRC's Commercial Data contracts and provided commercial support and governance to the business. From there she went to Equifax for over 7 years, where she headed up the Public Sector, supporting clients across Government, Police, Local Authorities, Housing and NHS. Julie led on all strategic procurement tenders, ensuring Equifax provided solutions that were fit for purpose and in line with client requirements and budgets. Building on her 24 years’ experience, Julie is now the Head of Government Sales within Synalogik. She ensures clients get the best solution to their problem, providing the Scout® platform and the right data to support investigations, intelligence, vetting, and fraud.