Last week the government published its long-awaited fraud strategy which seeks to strengthen the national response to fraud (HM Government, 2023). Fraud is the most common crime type affecting people in England and Wales, but the response of the police and other agencies has lagged behind the scale and nature of the problem. One of the main problems in developing a national response to fraud is the fact that our knowledge of who fraud offenders are and how they operate has been insufficient.
To address this the Police Foundation has published new research which takes a rare look at serious fraud offending against the public and businesses in the UK. It is based on in-depth analyses of 25 cases investigated by UK police and explores the methods employed to perpetrate serious fraud and the characteristics of the offenders and networks involved.
In recent years, improved data capture has shone more of a light on to the victims of fraud, but the evidence on offenders remains very thin, in part because they are a cohort of offenders who often remain hidden (to victims and the police alike) and so are less accessible to research. Much of the existing work has focused on understanding fraud perpetrated from within organisations, commonly termed ‘white collar fraud’. This ignores the significant growth and changes to fraud, largely due to an exponential growth in online communications, commerce and finance, and an accordant growth in criminal opportunities.
Our work sought to understand serious fraud in a modern-day context and put a human face to the people committing these crimes as well as seeking to understand their methods.
Why so ‘serious’?
This focus of this research was serious offending, though pinpointing fraud cases that are ‘serious’ is not a straightforward exercise. Fraud has been elevated to a national security problem and has been incorporated into the serious and organised crime and cyber security policy agendas, but there has long been ambiguity on how these policies relate to the job of policing fraud (for example, see Doig and Levi, 2013 below). Even big and impactful criminal actors can get lost in a landscape as sweeping as national security. Often, the only cases to register at this level are those linked to criminal actors involved in other criminal behaviour that is unequivocally ‘serious’ such as types of organised crime or terrorism.
Fraud policing is primarily reactive, investigating reported crimes where there is an apparent opportunity to do so, partly to avoid missing opportunities for crucial intervention, but also because fraud is not prioritised for the proactive resources needed to get on the front foot. So when scanning the expansive fraud landscape, instead of looking to find and pull the weeds that have grown the tallest, investigators most commonly reach for those closest to hand (i.e. where there are viable lines of enquiry). The introduction of the National Fraud Squad is an attempt by the government to address this issue, by taking a more proactive approach to identifying and targeting ‘high-end frauds and organised crime’. In an era where digital technology can be used to offend at scale, getting upstream to target determined and prolific offenders has the potential to add real value. However, it remains to be seen whether ‘serious’ frauds will continue to fall through the wide gap that separates this ‘high policing’ response from local police forces straining to deal with the substantive volumes of reported fraud, many of which may also be linked to serious criminals (see also, Garner et al, 2016; Skidmore et al, 2018).
Our research took the pragmatic step of selecting ‘serious’ cases on the basis that they had been prioritised and assigned to scarce specialist resources in economic crime teams. And in this context, fraud cases could be serious for very different reasons, with the key dimensions being:
- The scale of financial losses to the victims: in one investment fraud case there was a collective loss to victims of £39 million.
- The volume of victims: in one consumer and retail fraud case the offenders had impacted over 27,000 victims in the UK.
- The harm caused to individual victims: in one authorised push payment fraud case a victim suspected to have mental health difficulties had been repeatedly targeted and lost most of his life savings.
Only three cases satisfied our criteria for all three dimensions of seriousness, and all three were investment frauds.
In addition to the frauds that have already occurred, seriousness is an attribute of the offenders/criminal networks themselves, particularly in relation to the ongoing risks that they present to the public (e.g. their intent and capability to persist in their offending). And relatedly, seriousness reflects the capacity of the state to address these high-risk offenders. In this regard, the prominence of cross-border offending is significant, because it presents an external threat to internal order and thereby challenges our established structures and capabilities for controlling crime in the UK. The City of London Police estimate that over 70 per cent of fraud impacting on UK victims has an international component. Targeting this international contingent is a key aim expressed in the new government strategy.
Many offenders in our research operated from within the UK* but international elements were common and took various forms depending on the type of fraud. Among these international elements were co-offenders who were either UK nationals operating from overseas or foreign nationals operating within the UK, the suppliers of the goods or services sold or marketed to UK consumers, the online platforms used to market and sell the goods and services, the financial accounts and companies used to launder the money, and the suppliers of criminal data and software. These have implications for criminal investigation and evidence-gathering, but importantly, were not barriers to intervention, partly because the offenders maintained a significant presence within the UK.
The key point is that there are serious fraudsters with a significant presence in the UK. And furthermore, their impact was strikingly local, even in cases linked to cyber criminals, with most targeting victims based within the UK or even in regions close to where they lived.
The serious fraud problems?
Previous research into profit-driven crime argues that conceptualising crimes based on the processes for commissioning crime might be more instructive to our strategic responses (see Naylor, 2002 below). For example, instead of offender-based categories such as organised criminals, categories might more usefully reflect the different methods that are used to perpetrate crime. Fraud is a small word to represent 41 per cent of all crime experienced by the public. At its core, fraud is property crime where deception is used to make a personal gain, but there is a bewildering range of methods for deploying this deception. Furthermore, these can occur across a wide range of social, technological, commercial or financial settings.
In our study, there was an initial challenge to identify meaningful patterns among what appeared to be such a diverse set of offending. Borrowing from the work of Naylor (2002), two discrete categories of fraud offending were identified: commercial frauds that primarily involved the use of sales and marketing strategies to sell misrepresented products or services, and predatory frauds that commonly involved the impersonation of a legitimate individual or organisation. In dissecting the underlying processes for commissioning these frauds, several patterns emerged:
- Methods: the existing offence categories could be divided between the two, with commercial fraud incorporating categories such as investment and consumer and retail fraud, and predatory frauds, identity and payment diversion fraud.
- Settings: most commercial fraud were perpetrated from within a conventional business setting, whereas predatory frauds involved manipulating people or systems from without, with more reliance on online technology to be able to impersonate a legitimate person or organisation.
- Offenders: there was limited evidence that commercial fraudsters perpetrated predatory frauds and vice versa, most likely reflecting the distinctive settings in which they operated, and distinctive knowledge and capabilities required (see also, Levi, 2008 below).
- Victims: commercial fraudsters primarily targeted individual members of the public, whereas predatory frauds impacted on individuals and businesses.
This typology reveals two types of fraud that look quite different from one another, in terms of who’s offending, how and where, and against whom. It offers a tentative approach for making sense of a crime that is daunting in both scale and variety. Moreover, it indicates to two crime-related problems that should be sensitive to different control strategies.
The human factor
The offenders linked to these cases came from a wide range of backgrounds, ranging from offenders in established professions who had little or no prior offending history, to others affiliated to urban street gangs and with prior involvement in drug supply and serious violence offences. These different starting points gave shape to the frauds they were involved in. Notably, those who operated behind a legitimate company or profession were most able to offend for longer and steal larger amounts of money.
Co-offenders were present in most of the frauds, often providing the interface with the victim and helping to establish a veneer to persuade victims they were legitimate. Examples included the call centre staff tasked to market investment opportunities, the online retailer used to sell the goods and the couriers sent to collect the money from victims. Furthermore, the capacity to perpetrate fraud was in many cases limited to their capacity to launder the money. Some frauds involved co-offenders with a specific role in coordinating the movement of money, and in nine cases, ‘money mules’ were recruited from within social networks or wider community to provide access to their accounts.
There was a total of 104 known offenders linked to just 25 cases**. A high proportion were peripheral to the conspiracy. Some had only a partial understanding of the fraud, gained very little financially from their involvement, and became disassociated once a particular scheme had reached its end. In short, not all who were involved in serious fraud offending were serious offenders.
Fraud is a volume crime that is rising up the public agenda, a point reflected in the newly published government strategy for tackling fraud against the public; the first since 2011. This research examines some of the most serious frauds investigated by police in the UK, exploring the various components of ‘seriousness’, the different methods employed, and who the offenders are. Unpacking these various dimensions of the problem is a critical step towards rationalising our responses to fraud and configuring effective crime control strategies.
* The offenders examined in our study were investigated by UK police so on that basis are that are more likely to have a UK presence.
** In a number of cases there were co-offenders whose identity remained unknown.
Doig, A., and Levi, M. 2013. ‘A case of arrested development? Delivering the UK National Fraud Strategy within competing policing policy priorities’. Public Money and Management, 33 (2), pp. 145-152.
HM Government (2023) Fraud Strategy: stopping scams and protecting the public: https://www.gov.uk/government/publications/fraud-strategy
Levi, M. (2008) ‘Organized fraud and organizing frauds: Unpacking research on networks and organization’. Criminology & Criminal Justice, 8(4), pp. 389-419.
Naylor, T. (2002) A typology of profit-driven crimes. Canada: Department of Justice Canada