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UK Fraud Trends in 2021: Size and How Technology can Help Detect Fraud More Effectively

Author: Daniel White
Date: October 2021

Fraud is the most prevalent form of offending now in the UK, it’s growing when other crime rates are not, it creates more “victims” than any other form of offending in the UK and the State loses over £20billion per year as a result. However, Government and its Institutions can, and are in the process of, fighting back. In this blog, we present the statistics behind the scale of the problem, where fraud activity increased in 2021, and how technology can help overcome many of the challenges around fraud detection.

Scale of the Problem

According to the National Fraud Authority (NFA), public sector fraud costs the British taxpayer around £20.3 billion per year, equating to roughly three pence of every pound spent by the government (The Chancellor of the Exchequer announced in the 2020 budget that the UK Government were reducing spend on foreign aid from 0.7% to 0.5%, meaning the State currently “spends” six times as much on fraudsters as it does on foreign aid).

This £20B pales into insignificance when compared to the wider ONS statistics for fraud committed against the public and businesses that are now burdening Government Departments and police forces. Estimates from the Crime Survey for England and Wales (TCSEW) showed there were 4.5 million fraud offences in the 12 months to December 2020. The National Fraud Intelligence Bureau (NFIB), receiving information from Action Fraud, CIFAS and UK Finance, produced their latest figures that show an 8% increase in the number of fraud offences year on year, despite criminal offending rates covering all forms of criminality decreasing by 10% over the same time period.

Fraud constitutes just over 18% of ALL “victim-based crime” reported within the UK according to the Home Office “Police Reported Crimes” March 2021 and just shy of 13% of police recorded crimes to the year ending March 2021.

There were over 830,000 “fraud and computer misuse related offences” committed in the year to March 2021 and the NFIB confirm there were 6,388,000 incidents of fraud reported and over 5,000,000 victims in 12 months. With the UK population exceeding 67 million in 2020, that’s nearly 7.5% of us reporting being the victim of fraud in one year! And that is all in spite of the knowledge that a high proportion of fraud offences going unreported.

From our client interviews and reported statistics we can only see this trend increasing, yet again, as we move into 2022.

How Did Fraud Activity Change in 2021?

Trends published by CIFAS, UK Finance and Action Fraud, comparing April 2019-March 2020 rates to those ending March ’21, show that “banking and credit industry fraud” has decreased significantly over the pandemic, dropping from 433,336 cases to 393,068 (a 9% reduction); a re-assuring change given that criminals had hitherto been using instant and real-time payment networks and providers to steal and launder funds – concealing their tracks and leaving banks, the state or consumers to pay for the losses. Data breach occurrences lie at the heart of this form of offending, suggesting that financial services providers cracking down on these risks are reaping rewards.

In addition, “Corporate fraud by employees” or in “procurement” is down by 40% and “pension fraud” down by 39%.

But Many Areas Are on The Rise

In the year ending December 2020, UK Finance reported 2.9 million cases of fraud involving UK-issued payment cards, remote banking, and cheques. This represents a 4% increase compared with the previous year (2.8 million). There has been a 68% increase in “remote banking” fraud (73,640 incidents) reflecting the greater number of people now regularly using the internet, telephone and mobile banking for payments.

Insurers

Insurance fraud has risen significantly from 10,278 to 16,907 reported cases (a 64% increase in one year).

Finance

“Advanced fee payment fraud” is up 13% to 50,000 cases a year and “financial investment fraud” is up 44% to 20,260 cases per year.

These statistics show that the biggest victims of fraud in the current climate are the State, insurance companies, anyone selling something online and financial services providers.

Initiatives to Tackle the Problem

The question remains therefore what options are available to the UK Government, through its various departments, agencies and police forces to help businesses and the public sector better detect, deter, investigate and prosecute fraud in 2022?

Government Departments have made plain their awareness of the problem and set out plans to meet it head on.

POLICING

This year City of London Police launched a formal tendering process to replace the tool known as “Action Fraud”. That process is ongoing and will lead to three separate “Lots” of activity being provided by one or several companies ranging from large ‘System Integrators’ to small tech companies with discreet and specialised teams that solve distinct pieces of the fraud puzzle. The aim of such a project, one must imagine, being to reduce backlogs in fraud investigations, increase detection rates, bring efficiencies through technology and to stop the “fraud pandemic” that has been with us far longer than the viral one!

FCA

The UK’s Financial Conduct Authority (FCA) published its business plan for 2021-22. With Nikhil Rathi, Chief Executive of the FCA, stating;

“We have 2 key tasks – to make markets work better and to stop and prevent serious misconduct that leads to harm. The organisation is transforming to achieve these goals – investing in new technology and making better use of data, supporting our people and changing our culture, working in partnership with other organisations in the UK and globally. We are committing to clear measures so we can be held accountable for our progress.”

HMRC

In July 2021, Janet Alexander, Director Covid, Customer Experience, Professionalism and EU Transition (CEPET) at HMRC responded to the Public Accounts Committee report on “Fraud and Error” (which said that up to £27billion in bounce back loans may not be repaid due to businesses either entering administration or fraud) saying:

HMRC is measuring the level of error and fraud within the Coronavirus Job Retention Scheme, Self-Employment Income Support Scheme and Eat Out to Help Out scheme. We have already opened 12,000 inquiries into suspicious claims and have made eight arrests with more in the pipeline.

Key Challenges

The greatest tool in the fight against fraud for any law enforcement agency or police force is its people; the hard-working investigators, analysts, officers and civilian administrators who tirelessly and often turgidly evaluate cases as they arise. Their time is the most precious resource available in the fight against fraud. We can’t keep hiring an 18% larger team each year to deal with this rise in reported fraud and, in my experience of 18 years prosecuting fraud across most courts in the United Kingdom, I have never once heard an investigator tell me that they had too many people in their department or not enough crime to investigate!

If that’s the case, the State is duty bound to find and evaluate ways of making their existing teams more efficient. Cut out repetitive tasks which modern technology can accomplish infinitely quicker and with greater accuracy. Leave “people” to do what they do best; make decisions when provided with ALL the correct information regarding a suspected fraud.

These “people” have “the investigators nose”, the ‘know how’ on where to look, what’s suspicious and when further enquiries might be required.

How Technology Can Help

Prior to Co-Founding Synalogik with a former police officer and specialists from the intelligence and IT community, I was acutely aware of the delays in bringing prosecution cases together. Police analysts, digital investigators, cyber investigation teams and intelligence teams spend significant proportions of their time making enquiries into multiple different “silos” of data. The arduous task of logging in and out of multiple interfaces, sometimes on different terminals or in different buildings, with the inherent risk of human error when then combining their findings, was a perennial problem.

Officers presented with hundreds of phone numbers, thousands of vehicle registrations or terabytes of accounting data can spend many hours or sometimes weeks conducting this logging in and out process as they try to find the needle in the haystack. With the research done, the team member then has to record their findings and activity in a compliant way.

At Synalogik, we wanted to change that. We set out in 2018 to create a secure, compliant and efficient platform that allowed teams to process individual cases or bulk uploads through ALL their data sources and in one go. We cleansed the results and gave them the ability to flag aspects of the data that might be of concern. We gave them the ability to clash very large data sets to see where the overlap may lie and we gave them the ability to take a small piece of evidence, perhaps just a name, company or a phone number, and to find out what information there was within all their data sources about line of enquiry.

Our aspirations are met each day as we continue to work with public and private sector clients to combat fraud, anti-money laundering and criminality. If you investigate fraud, manage a team of investigators, head up a Government department or want to know how we could help your business, please reach out to us at: enquiries@synalogik.com and we’ll show you how we can save your team time, find more fraud and enhance your reputational standing.

Our team of specialist data scientists and engineers integrate our platforms with sensitive Government data sets, third party data bases and the worldwide web, using a variety of secure integration techniques. Our platforms have been approved for use for a range of Government and Law Enforcement Authority user cases as well as for Tier 1 banks, insurance companies and licensed gambling operators.

If you would like to find out more about how Scout® can help you tackle financial crime, contact us below:

 

Daniel White
Daniel Co-Founded Synalogik Innovative Solutions in 2018 with individuals who came from intelligence, policing and military (UKSF) backgrounds. Daniel has practised for 18 years as a barrister in Citadel Chambers, after studying law at Birmingham University. He specialises in sports and criminal law; in particular the prosecution of serious and grave offences. Daniel is also a Judicial Officer for the RFU, Six Nations and World Rugby.