Financial fraud is now the most common crime in Britain, perpetrated in enormous numbers by organised criminals both domestic and international. It hits every part of society, but with most fraud now experienced online, younger generations – digital natives who are most likely to use the internet for banking, shopping and to share their details online – are now the most vulnerable. The threat includes criminals illegally accessing personal accounts and cards to steal money, as well as the subtler problem of scams, where the victim makes a payment under false pretences. Despite a range of initiatives – some more successful than others – government, financial institutions and others are still struggling to meet the challenge.
This paper describes how the nature of fraud (including scams) has evolved in recent years, and how government and law enforcement authorities have been tackling the problem. It offers a series of recommendations for governments, banks and others that could, if implemented, stem the tide of these crimes in the UK, better protect consumers and give them the confidence to surf, shop and securely send money online.
There is a common misperception that older people are most at risk from fraud. In fact, it is the younger ‘digital natives’ that are most vulnerable as these crimes have moved online. Studying different age groups, this research found that 25-44 year olds are most at risk from fraud; 16-24 year olds are most at risk from computer misuse crime (eg viruses and hacking); and under 21s are increasingly at risk of having their accounts used for illegal activity
Incautious behaviour is putting digital natives at risk. Confidence using technology can easily slip into foolhardiness, with security most lax on the devices disproportionately used by digital natives for banking and shopping. While 86 per cent would install security software on a PC, just 57 per cent and 50 per cent would do so on tablets and phones respectively.
For years, governments have thought crime was falling; in fact, much of it has simply moved online. The government has started to respond, but there is a lack of clear accountability between various bodies.
The criminal justice system has not yet adapted to these new threats. Banks have responded, but are hampered by existing technology, regulations and limited coordination. Despite promising technological innovations, the response of the tech giants has been muted.
We are calling on the government to:
Ensure the next generation of digital natives know how to stay safe online, stepping up online safety education and making all teenagers complete a short, online course in cyber security, fraud and scams before they leave school.
Work with the Joint Fraud Taskforce to design and introduce a National Fraud Indicator and an ambitious target for fraud reduction – a 25 per cent reduction by 2025.
Bring together existing resources into a new national Economic Crime Agency, with powers to investigate, disrupt and prosecute for fraud and scams. Require all companies to report data breaches – no loopholes or caveats.
Invest more in victim-orientated approaches to disrupt scams through the use of financial intelligence.
Law enforcement should:
Reallocate resources and staff into economic crime and introduce web constables.
Make greater use of social network analysis in fraud investigations, which will require better data-sharing across government departments and agencies.
The banking sector should:
Set up an industry-wide initiative to tackle card not present fraud by upgrading card technology.
Encourage – both through innovative design and financial incentives – customers to choose a package of new, more secure, banking services which reduce the scope for APP scams.
The telecommunications and tech sector should:
Work more closely with banks and government organisations to tackle the problem, joining the Joint Fraud Taskforce and spreading the anti-fraud message on their platforms.
Make computers and phones more secure, by design.
Government and the private sector must work together to:
Review how financial losses that result from APP scams should be allocated between consumers, banks, and telecommunications and technology companies.
As has been achieved for in-branch transactions through the Banking Protocol, develop a new, step-by-step approach for tackling fraud and scams that take place via electronic transfers.
A modern epidemic
Fraud and scams, as forms of deception, are as old as humanity itself. All that is required is for one person to deceive, trick or impersonate another and so steal from them. But for centuries these crimes were kept at bay by several factors: most people were poor so had little to steal while the rich were highly protected; people generally transacted only with people in their immediate locality who they knew; and money was physical, making it cumbersome for fraudsters to find and move. Significantly, without the existence of a substantial police presence, it was simply easier to steal or burgle. The result was that fraud was a mostly minor occupation.
But the social and economic changes of the last few decades have swept away these barriers. Economic advances mean many of us now have the incomes of latter day kings, but without the bodyguards to protect us, making us all potential targets. Meanwhile, globalisation means we can communicate with, and transfer money to, unknown people in any part of the world. And money is now almost entirely digital, not physical – for a transfer to take place often all that is required is a few taps on a smartphone. At the same time, modern police forces have continued to prioritise physical crime – displacing criminals into the more anonymous world of fraud and scams.
The impact, as this report argues, has been dramatic. Financial fraud has exploded, becoming the most common crime in Britain today. It is perpetrated in enormous numbers in the UK by organised criminals based around the world. But, by and large, the government and financial institutions are still struggling to contain this distinctly modern epidemic. The forces that have unleashed this epidemic will not go away any time soon. But there is still much that can be done to keep it at bay.